The first shipment of liquefied natural gas from the lower 48 U.S. states to China arrived this week, thanks to the recently expanded Panama Canal’s easing access to the robust Asian market for U.S. gas exporters.

The shipment was chartered by Royal Dutch Shell PLC, the company confirmed to The Wall Street Journal. The cargo, from the Sabine Pass export facility in the U.S. Gulf of Mexico, was delivered to the Yantian Port on Monday in southern China and was purchased by China National Offshore Oil Corp. as part of a long-term contract, according to S&P Global Platts, an energy and commodities information provider.

Cnooc didn’t respond to a request for comment.
U.S. LNG, which is usually transported on large ships that can’t fit in the older Panama Canal locks, hasn’t been able to compete in Asia. The new locks, which opened in June and can accommodate larger ships, mark a significant moment for U.S. exporters.

“The expansion has significant implications for LNG trade, reducing travel time and transportation costs for LNG shipments from the U.S. Gulf Coast to key markets in Asia and providing additional access to previously regionalized LNG markets,” the U.S. Energy Information Administration said.

The new locks can reduce the travel time from the U.S. to North Asia for ships that couldn’t fit in the old locks by about one third—to 20 days—and cut transportation costs by about 30 cents to $1 per million British thermal units, said research consultancy Energy Aspects,.

“This shipment could be the start of many more U.S. gas cargoes coming to Asia, especially now more Chinese smaller independent gas companies are keen on buying foreign gas on a spot basis, ” said Peter Lee, an Asian energy analyst at BMI Research.

LNG is natural gas that is cooled in ultralow temperatures to a liquid form so it can be stored and transported by ship. Prices have recently come under intense pressure in Asia, which makes up 70% of the world’s demand, due to a gusher of new supply.
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LNG producers expect to add 40 million metric tons of capacity in 2016 alone.

Meanwhile, demand in Japan and South Korea—the top two importers of LNG in the world—is falling due to such factors as a decline in overall power demand and an increasing reliance on coal. Moreover, many buyers have already signed contracts to take LNG from suppliers for the next decade or more.

“[This leaves] China as the main growth story for LNG in the region,” said Stuart Elliot, an LNG analyst at S&P Global Platts.

China’s LNG imports were up 21% on-year in the first six months of this year to 11.5 million tons. Australia and Qatar were the leading two suppliers, according to China’s General Administration of Customs.

Chinese government officials have said they want to increase the ratio of natural gas in the country’s total energy mix to 10% from the current 5% by 2020.

By Jenny W. Hsu at The Wall Street Journal

—Sarah Kent in London and Mayumi Negishi in Tokyo contributed to this article.