Another canal? Really?

July 28, 2014
International businesses, especially oil and gas companies, in recent years have watched with growing interest the work to increase shipping capacity through the Panama Canal.

International businesses, especially oil and gas companies, in recent years have watched with growing interest the work to increase shipping capacity through the Panama Canal. Oil & Gas Journal has factored that increment into its various analyses of global hydrocarbon movements, especially as LNG has become more widely traded (OGJ, Apr. 7, 2014, p. 108).

At the same time, ports on both sides of the Americas have responded with projects to benefit from the expansion or at least not to lose business to other ports because of it. The Port of Houston exemplifies the former, the Port of Los Angeles, the latter.

For some months recently, however, various media have reported on a project that may be a response to the response: Last month Panama neighbor Nicaragua awarded a 50-year concession to privately held, Hong Kong-based HKND Group to build yet another and much longer canal linking trade between the Pacific and Atlantic oceans.

The almost universal response has been a puzzled "Really?!"

Canals: then and now

Let's refresh memories.

Global maritime trade leaped forward in the late 19th century when in 1869 the Suez Canal opened for business, linking the Mediterranean and Red seas. Commerce between Asia and Europe increased almost immediately.

Employing no locks, the Suez Canal began as a 102-mile long, 26-ft deep trench. Its most recent configuration is 120 miles by 79 ft by 673 ft wide; still no locks. Simple and straightforward, it takes advantage of tides and flows generated by the moon and the calendar. It took 10 years to build.

Much shorter but more complicated—two locks and two dams—is the 48-mile Panama Canal, which the French began building in 1881. Its construction is a far more sordid story, which you can read elsewhere. But picking up in 1904 where the French had failed, the US managed to complete the canal in August 1914. By then, however, Europe was a bit distracted.

The current work to expand the Panama Canal, also known by the prosaic "Third Set of Locks Project," will double capacity when it opens next year. The project is installing a new lane of traffic to accommodate much larger, more modern vessels.

Under construction since September 2007, it is building two new locks, one each on the Atlantic and Pacific ends that will employ three chambers, widening and deepening existing channels, and raising the level of Gatun Lake, which has always formed the core of the route.

So far as LNG is concerned, the canal will go from handling only the smallest of LNG carriers to handling, by some estimates, about 80% of the current fleet.

Now, Nicaragua

Not to be outdone, Nicaragua appears ready to start construction later this year on a $40-50 billion, 173-mile long canal through Lake Nicaragua (for about 56 miles) but also traversing—and destroying—many more miles of jungle and shallow streams.

HKND Group, mentioned earlier, is the creation of Chinese telecommunications tycoon Wang Jin. But is he going to bankroll the project? If not, then who or what?

A "dog 'n pony" show in Nicaragua earlier this month featured the smiling Wang and Nicaraguan President Daniel Ortega. Long on hype and short on specifics, the event only added to the unease many are feeling about the project.

On the other hand, global environmental groups are almost apoplectic in denouncing it.

A February article in Nature by prominent environmentalists Axel Meyer and Jorge A. Huete-Perez presented a litany of apocalyptic scenarios for species along the project's route as it destroys habit and sensitive fresh and saltwater confluences.

Studies of the environmental effects of the project are yet to be conducted…or even acknowledged by the company contracted to run them, Environmental Resources Management. And ERM does not respond to media phone calls or e-mails and does not list the project on its web site.

But stay tuned here; OGJ will keep you posted.