Opinion: American LNG, Oil and Coal to China via Mexico

Oleksandr Kalinichenko / Shutterstock

By Albert A. Melvin (Opinion) – The USA, China, and Mexico have an excellent trans-Pacific trade opportunity that can greatly benefit all three countries for the next 25 years and potentially beyond. The key is a state of the art, deep-water port in Sonora, Mexico taking advantage of the naturally deep water in the Sea of Cortez. This proposed port would be very similar, but larger in size and purpose, to Delta Port near Vancouver, BC. The new port would be an economic engine for the State of Sonora creating peace and prosperity for the border region with the State of Arizona through new jobs and business activity. This port would further positively impact the USA and Native American job market due to increased energy and mineral exports from the USA.

The USA has an unlimited export supply of coal, LNG, and oil. China, Japan, Korea, and India plan to use these major sources of energy for at least the next quarter century. Each of these will be discussed in detail in this Op-Ed starting with coal. For decades, powerful American environmental organizations have prevented the export of coal through all ports in California, Oregon, and Washington. Coal in the western states had to be transported to western Canada for export to Asia. The world’s largest coal importing countries in descending order are Japan (17.%), China (14.1%), India (11.6%), and S.Korea (11.5%).

Fortunately, for the past year, some American coal has also been moving by rail through Nogales, Arizona to the Port of Guaymas in Sonora for export to Asia. The current volume is one 100 car coal train every three days with 40 tons per car. This volume of 4,000 tons of coal every three days is the maximum that the current rail system can handle. The Port of Guaymas has also reached its maximum capacity. There is tremendous potential for American coal exports. The Navajo Nation in Arizona has 50% unemployment even though it has two major coal mines. Exporting their coal would greatly help these Native Americans. To substantially increase the volume of American coal through Sonora to Asia, the proposed port will be required, along with double tracking the existing rail and by-passing Nogales with a new tunnel system. The new port project and the required rail upgrade system will each cost approximately $2 billion. The bankable feasibility study will cost $1 million.

LNG, liquid natural gas, is now moving from ports in the US Gulf of Mexico, via the Panama Canal, to Asia. Unfortunately, Panama Canal fees now average $1 million in each direction. The distance from the new port location in Sonora to Shanghai is 6,850 nautical miles (nm) compared to 10,150 nm from Houston to Shanghai via the Panama Canal. This shorter distance of 3,300 nm at 20 knots is a savings of 8 days in one way transit time. An LNG vessel loading in Sonora, Mexico would make four more R/T trips to Asia, per year, compared to one loading in Houston. The four largest LNG importing countries are Japan (28.8%), China (13.5%), S.Korea (13.2%), and India (7.1%).

For the first time in 75 years, the USA exported more oil and gas in early Dec 2018, than was imported. Related to this, China is the largest oil importing country at 18.6%. If China starts to import American oil, it could be loaded at the proposed ultra-deep-water port in Sonora on a ULCC (Ultra Large Crude Carrier) carrying 2.2 million barrels of crude, with a depth of 66 feet. At a speed of 15 knots, the transit time to Shanghai would be 20 days compared to loading near Houston and transiting south of Africa to Shanghai with a transit time of 42 days to cover 15,200 nm.

This proposed port in Sonora, Mexico has the potential of being the first port in North America capable of handling, on a steady basis, the largest container ships in the world, which are 19,000 to 23,000 TEU (Twenty-foot Equivalent Unit). 20,000 TEU is the equivalent of 10,000 forty foot 18 wheeler trailers. At present, there are 72 of these vessels in service, all operating in the Far East/ Europe trade. Forty-two additional vessels of this size are now on order. They are too large for the Ports of Los Angeles, Long Beach or any Pacific Coast port to handle on a steady basis because the number of containers would overwhelm their existing shoreside infrastructure. The largest container ships now in the trans-Pacific trade are 14,000 TEU. Due to the tremendous economies of scale, a 20,000 TEU ship has 50% lower operating costs and 50% lower CO2 emissions versus a 14,000 TEU ship. Shipping stake holders will be very interested in this port because it can make the trans-Pacific container trade far more cost-effective than it is now. The container port operation would be ship to train and train to ship with no trucks involved. All rail operations would be double tracks with Double Stack Trains (DST’s).

China is the largest importer of copper concentrate. This port is in an excellent position to load out copper concentrate from the many copper mines in Arizona and Sonora, Mexico. Mexico is the fifth largest auto manufacturing country. The largest Pure Car Carrier vessels can carry 8,500 automobiles. From this port, they will be able to load out cars made in Mexico to worldwide markets.

The USA, PRC, and Mexico, with their relatively new Presidents, have a unique world trade opportunity through the development of this new purpose-built port. This port will result in tremendous stability across the US border with Mexico between the States of Sonora and Arizona. This port will create much-needed jobs on both sides of the border while greatly facilitating exports to Asia for the benefit of all. Economic stability, trade balance, and the prosperity of citizens in all three countries will be served.

Mr. Albert A. Melvin owns Ameri-Qic LLC, is a Captain, USNR (Ret) and a retired Arizona State Senator.