Energy

Panama is a net energy importer. Oil is the primary import and in 1998 Panama is estimated to have imported about 50,000 barrels per day of oil.

Hydroelectric power is the primary domestic energy resource and produced an estimated 24.5 percent of Panama’s total energy requirements in 1998. In the electric sector of 4.56 billion kwh produced, 73 percent is produced by hydroelectric plants.

Panama has negligible hydrocarbon energy reserves and imports over 70% of its energy. Virtually all oil is imported, and the country neither produces nor consumes natural gas.

In June 2000, neighboring Colombia's Senate approved a bill allowing natural gas exports, which previously had been banned. This paves the way for the possible construction of a gas pipeline leading from offshore Colombian gas sources directly to Panama. U.S.-based Enron in April 2000 announced plans to invest about $400 million to build such a pipeline.

Electricity generation accounts for most of Panama's domestic energy production, with hydroelectric generation alone accounting for 75% of the country's total energy production. In 1998, the state-owned electricity company, IRHE, was broken up. There are currently eight electricity generators and three distributors operating in Panama. Foreign company involvement in the Panamanian electricity sector includes U.S.-based Coastal, AES, Enron, Illinova, and Noresco, Canada's Hydro Quebec, and Spain's Union Fenosa. EGE Fortuna, owned by Coastal and Hydro Quebec (51%) and the Panamanian government (49%), is the country's largest generator, with 300 megawatts (MW) of hydropower. Transmission remains in the hands of the government through the publicy-owned Etesa company. Also in 1998, a regulatory body was created, Ente Regulador, to oversee the electric, telecommunications, and water sectors.

Electricity demand is expected to grow significantly in the coming few years, and new projects are planned to help meet this demand. In May 2000, the Inter-American Development Bank (IDB) Private Sector Department approved its first project in Panama. The IDB will loan $59.8 million to IGC/ERI Pan Am Thermal Generating Limited (PATG) for the construction and operation of a 96-MW, $92-million thermal electric plant near Panama City. Construction of AES's $200-million, 132-MW Esti hydroelectric project in Panama's Chiriqui province began in early August 2000. Esti is made up of two hydroelectric plants, Guasquitas and Canjilones, on the Chiriqui river. By September 2000, Etesa is expected to launch the bidding for the construction of a $144-million transmission line to transport power from Esti.

Central America has been discussing plans to link the region's electricity grids. The Sistema de Interconexion Electrica para America Central (SIEPAC) project calls for the construction of transmission lines connecting 35 million consumers in Panama, Costa Rica, Honduras, Nicaragua, El Salvador, and Guatemala. The project remains in the planning stages, and consultants involved in the project estimate that the line could become operational by 2003 at the earliest. SIEPAC could cost an estimated $300 million.

The Panama Canal extends approximately 50 miles from Panama City on the Pacific Ocean to Colon on the Caribbean Sea. It is widely considered to be one of the world's great engineering achievements. The United States is the largest user of the Canal in terms of cargo tonnage, as either port of origin or destination, although Asian countries are beginning to close the gap. About 12% of U.S. sea-borne international trade, in terms of tonnage, passes through the Canal annually. Ships bound for Japan from the East Coast of the United States save about 3,000 miles by going through the Canal; ships sailing from Ecuador to Europe save about 5,000 miles.

In 1903, the Republic of Panama and the United States signed the original Panama Canal Treaty, which allowed the United States to build and operate a canal connecting the Pacific Ocean with the Caribbean Sea through the Isthmus of Panama. The Treaty granted the United States the use, occupation, and control of a Canal Zone, approximately 10 miles wide, in which the United States possessed full sovereign rights. In return, the United States guaranteed the independence of Panama and paid the government of Panama $10 million, as well as an annuity of $250,000, which each year increased at a rate far beyond that of inflation.

On September 7, 1977, a new Panama Canal Treaty was signed by President Torrijos of Panama and President Carter of the United States that transferred full control of the Canal to Panama on December 31, 1999. Under this Treaty, the Panama Canal Company, the Canal Zone, and its government were disenfranchised on October 1, 1979, and replaced by the Panama Canal Commission that operated the Canal during the 20-year transition period that began with the Treaty. The Panama Canal Commission has now been replaced by a new Panamanian entity, the Panama Canal Authority. The treaty guarantees permanent neutrality of the Canal. Control over U.S. military facilities in the former Panama Canal Zone has reverted to Panamanian authority. The U.S. Southern Command and U.S. Army South troops moved out of Panama at the end of 1999. A Hong Kong-based company, Hutchison-Whampoa, now operates the ports at both entrances to the Canal. This has been a cause for security concerns among some lawmakers in the United States, although the United States is legally entitled to intervene to maintain the neutrality of the Canal.

The U.S. Gulf/East Coast-Asia route is the dominant trade route for the Panama Canal, boosted by increased U.S.-China trade. Movement between Europe and the west coast of the United States and Canada comprise the waterway's second major trade route. However, the Panama Canal is seeing a boost in North-South trade, which is expected to grow as Latin America evolves as an increasingly important trading partner of North America.

In fiscal year 1998 (ending September 30), approximately 625,000 barrels per day of crude oil and petroleum products passed through the Panama Canal. Over 60% of total oil shipments went from the Atlantic to the Pacific, and oil products dominated this traffic. Crude oil accounted for the majority of Pacific to Atlantic oil traffic, with much of this coming from the Alaskan North Slope. Petroleum products combined accounted for over 60% of all petroleum shipments through the Canal.

The United States has become increasingly less reliant on the Panama Canal for its oil imports. U.S. crude oil imports transiting the Panama Canal totaled 78,670 barrels per day (bbl/d) in 1999, out of total U.S. imports of 9.8 million bbl/d. While the U.S. imports only slightly less oil through the Canal than 20 years ago, it no longer relies heavily on the Canal to move oil from one coast to the other. In 1979, 265,768 bbl/d went through the Canal that both originated in and was destined to the United States; this number fell to 2,210 bbl/d in 1999.

Petroleum is one of the largest commodities (by tonnage) shipped through the Canal and accounted for 16%-17% of total canal shipments during fiscal years 1996-1998. Some coal is shipped through the canal as well, accounting for 5%-6% of total Canal traffic. Over 10 million short tons passed through the canal in fiscal year 1998 (down from over 12 million short tons in fiscal years 1996-1997), with almost 80% going from the Pacific to the Caribbean.

The Canal is capable of accommodating about 50 ships per day (the maximum has been 65 transits per day). Oceangoing vessel transits totaled 13,025 in fiscal year 1998, or an average of 35.7 vessels per day, a 1.0 percent decline from 1997's 13,158, or 36.0 vessels per day. Transit by the 50,000-ton Panamax class ships, the largest vessels that the waterway can accommodate, totaled 3,998 or 30.7% of the total oceangoing transit.

If transit were halted through the Canal, the Trans-Panama pipeline (Petroterminal de Panama, S.A.) could be re-opened to carry oil in either direction. This pipeline is located outside the former Canal Zone near the Costa Rican border, and runs from the port of Charco Azul on the Pacific Coast (near Puerto Armuelles, southwest of David) to the port of Chiriqui Grande, Bocas del Toro on the Caribbean. It was opened in October 1982 as an economical alternative to the Panama Canal for transporting Alaskan oil across Panama en route to Gulf Coast ports. Transit time from Alaska to the U.S. Gulf Coast via Panama is about 16 days, whereas a tanker would take 40 days to reach the Gulf Coast from Alaska if rerouted around Cape Horn (the southern tip of South America). More than 2.2 billion barrels of Alaskan crude oil has been transported through the 81-mile pipeline. However, the 860,000-bbl/d pipeline was closed in April 1996 after Alaskan oil shipments to the Gulf Coast declined with falling Alaskan oil production (Alaska now produces about 1 million bbl/d) and increased oil consumption on the west coast of the United States, especially in California. In addition, the decision to allow Alaskan oil to be exported outside the U.S. reduced the incentives to ship Alaskan oil to the Gulf Coast. There has been some discussion of reversing the direction of the pipeline to allow Caribbean oil producers a less expensive outlet to Pacific destinations.

The Panama Canal Authority (ACP) currently is studying the possibility of expanding the Canal. Feasibility studies for a series of capacity-enhancing projects are nearly complete. Projects currently under study include plans for damming new water resources, building hydroelectric power generation plants (the Canal already has two hydroelectric plants and one thermal electricity plant), widening and deepening existing channels, and the construction of two new sets of locks.

The 86-year-old Canal already has undertaken some improvement and modernization projects. The expansion of the narrow Gaillard Cut is over 90% complete, and tow track locomotive replacement plans are on schedule. The Canal’s new Enhanced Vessel Management System (EVTMS), designed to achieve maximum safety and efficiency during Canal transits, has been installed and is in the final stages of adjustment. There also are plans to modify the Canal's booking system and to minimize maintenance-related delays in traffic.

Panama
Key Sectors
Energy: Production and Consumption of Primary Energy
(Quads)