New LPG Pipeline for Panama Canal

On April 4, The Panama Canal Board of Directors authorized a bidding process to develop a new pipeline facilitating the transport of hydrocarbon gas liquids along the West Bank of the Panama Canal from the Caribbean Sea to the Pacific. The bidding process will be transparent, rating proposals based on their technical capacity to develop the pipeline route and operate the line thereafter. This news comes one month after Panama Canal Administrator Ricaurte Vásquez Morales spoke at the International Liquefied Petroleum Gas (LPG) Conference in Tokyo, Japan where he focused on the Canal’s key role in American and Asian economies.

In 2024, propane exports from the U.S. set an all-time record of 1.8 million barrels per day, led by Japan, China, and South Korea. The majority of these exports originate in the refinery belt along the Gulf of America from Texas to Alabama, where LPG is loaded onto Very Large Gas Carriers (VLGCs). VLGCs are able to transit the Panama Canal through new locks established in 2016 during high-water periods, however record droughts from late 2022 through 2024 forced large carriers and cargo vessels to wait in long queues or otherwise offload their goods for overland transit. The Panama Canal Authority reported a 29% drop in vessel transits during fiscal year 2024 with the biggest hits on hydrocarbon gas liquids, which dropped 66%, largely due to the size of the vessels. Needless to say, this cost the LPG export market billions of dollars in delayed revenue. In order to curb the impact of such environmental hazards and meet the projected 6% growth of the U.S. LPG export market in 2025 and beyond, Panama is committed to building overland transit routes to ensure the Canal remains a viable transit corridor. The Canal is already bolstered by road and rail routes from Colón to Panama City, with significant crude oil storage on both shores and the potential for greater LNG and LPG storage capacity.

The pipeline news comes amidst increased focus on the region by the Trump Administration, which is adamant that the U.S. maintains and improves its agreements with Panama for commercial transit fares and the passage of military vessels. On the same day as the announcement of the pipeline, Panamanian President José Raúl Mulino met with U.S. Defense Secretary Pete Hegseth for roughly two hours, discussing security cooperation to combat Chinese influence in the region and a U.S.-financed dock at the Vasco Nuñez de Balboa Naval Base. Soon after on April 9, in a joint statement by U.S. and Panamanian authorities, Mulino announced Panama’s intention to exit the Chinese Belt and Road Initiative, reduce illegal immigration through its southern border, and commit to a slew of bilateral defense initiatives leading to further investment in and reliance between the two countries. All positive news for American economic interests seeking a free and safe global shipping environment.

Regardless of global politics, expanded infrastructure to facilitate propane shipping is positive news for the billions of people globally who benefit from access to propane’s economic and social impacts, and the growing relationship between the U.S. and Panama signals greater opportunities for propane on the world market. For more information, contact NPGA’s Manager of Grants & Agency Engagement, Nicholas Edward.