Panama Atlantic coast bunker sales seen rising in 2020

Bunker sales on the Atlantic side of the Panama Canal, where more low-sulphur sourcing options are available, are expected to gain market share from the Pacific side from 2020 onward.

As marine fuel demand shifts to 0.5pc sulphur from high-sulphur fuel oil (HSFO), the low-sulphur fuel can be supplied to the Atlantic side of Panama from Brazil, the US Gulf coast and Europe. By contrast, sources of 0.5pc sulphur fuel oil for the Pacific side of the Canal will be more limited, Slivia de Marucci, executive manager of economic analysis and market research for the Panama Canal Authority, told the attendees of the Argus Fuel Oil Summit in Miami, Florida.

A regulation the Panama Canal is considering that would enable offshore bunkering on the Atlantic side could also spur demand.

Currently, vessels on the Atlantic side are only allowed to fuel at the breakwaters area, where space is limited. The regulation will allow vessels to bunker outside the Atlantic coast breakwaters while remaining in queue to cross the Canal, thus optimizing their waiting time.

Historically, sales on the Pacific coast of Panama have been higher than the Atlantic side, in part because there are no area bunkering restrictions. In addition, the Pacific side has had easier access to HSFO from Pacific supply locations. In 2018, 27.1pc, or 13,000 b/d, of the HSFO shipped to the Pacific side originated from the Mexican west coast; 26pc, or 12,500 b/d, from Ecuador; 24.4pc, or 11,700 b/d, from Peru and the rest from the US, Chile and Colombia.

By contrast, more than 83pc of the HSFO imports to the Atlantic side in 2018 originated from the US, and the remainder came from the Netherlands Antilles, the Netherlands, Trinidad and Tobago, Colombia and Peru.

De Marucci quoted projections from international energy watchdog the IEA that peg the share of 0.5pc sulphur fuel oil sales in Panama at 23pc, or 25,400 b/d, of total consumption in 2020 and marine gasoil (MGO) sales at 45pc, or 50,500 b/d.

IEA estimates Panama's HSFO demand for bunkering at 32pc or 35,519 b/d in 2020 reflecting vessel non-compliance and the use of scrubbers. The share of HSFO is expected to decline to 23pc or 30,600 b/d in 2024 as non-compliance drops. The share of MGO and 0.5pc sulphur fuel oil is pegged even at 38pc, or 50,000 b/d, each in 2024.

From the inauguration of new Panama Canal vessel locks in June 2016 to the end of September 2019, nearly 8,000 Neopanamax vessels crossed the canal. Of these, 45pc were container ships, 25pc LPG carriers and 11pc LNG carriers. The Panama Canal handles around 18pc of LPG trade.