Black Gold: Another Billion-dollar Project for Panama

May 28, 2007
Panama City, Panama

As if Panama didn’t have enough exciting news, the latest proposal—an $8 billion oil refinery mega-project—is now poised to become a reality. A Memorandum of Understanding (MOU) has been signed between Occidental Petroleum, Qatar Petroleum Company, and Panama’s Ministry of Trade and Industry. Panama President Martin Torrijos was present at the signing ceremony that took place in Panama just days ago.

The refinery will be built on Panama’s Pacific coast, in Puerto Armuelles, Chiriqui, provided the location checks out following feasibility studies. Occidental and Qatar Petroleum expect to spend some $20 million on engineering studies, and then between $15 and $20 million on a second phase of studies, to include plant construction, labor, and total construction costs.

Preliminary plans are for the second phase to reach completion by mid-2008 and for construction to take three to four years, for completion by 2012. The refinery will churn out some 350,000 barrels of refined petroleum daily.

President Torrijos cited the refinery as one of Panama’s top three most significant projects. The other two are the upcoming Panama Canal expansion mega-project and the U.S.-Panama Free Trade Agreement (FTA), which experts say may be ratified by the U.S. Congress as early as this June.

Local officials are optimistic about the project because Puerto Armuelles is a poor area—they expect the refinery will help improve conditions there. Also, meeting energy demand is a major topic of discussion in Panama. Although Panama rarely experiences any type of outage, local experts worry that the infrastructure won’t be able to keep up with the rapidly increasing energy demand. But the government is taking steps. Public bidding is already underway for some 100 megawatts of energy, to be purchased by local providers Edemet and Elektra Noreste to meet the rising demand starting in 2009.

An Organization of American States (OAS) meeting June 3–5 will take place in Panama City, with energy costs, development, and security as the focus. During the meeting, themed “Energy for Sustainable Development,” Western Hemisphere foreign ministers from North, Central, and South America will discuss lowering high energy costs to fuel development in the region. U.S. Secretary of State Condoleezza Rice has confirmed that she will head the U.S. delegation, in recognition of the positive status of U.S.-Panama relations.

Best regards,

Jessica Ramesch
Editor, Panama Insider