Panama backs proposal to build $40 bln energy hub
Wednesday, November 21 2007 @ 01:19 PM UTC
Contributed by: Don Winner
Editor's Comment: Oh, hell yeah. For those who are keeping score, allow me to break some of this down for you:
- $40 Billion: This refinery and pipeline project is expected to require a total of $40 billion dollars in foreign direct investment to build. That's great news for the Panamanian economy all by itself, and once its built the facility will continue to generate jobs and revenue.
- $10 Billion: The responsibility to develop and manage the former Howard Air Force Base has been awarded to London & Regional, a UK-based company. A specially created government agency will provide residents with streamlined regulation and there will be tax incentives for selected industries. The project will reinforce Panama's attractiveness as an international business center.
- $8 Billion: The planned Oxy/Dubai refinery in Puerto Armuelles is another incredibly significant project for the Panamanian economy. Panama is out of the path of hurricanes and is still only about 50 miles wide from ocean to ocean. These refinery projects come about as a result of hurricane Katrina which knocked out a lot of the oil refinery capacity in the United States along with record highs for crude oil prices. The world needs new refineries and there is crude that needs to be refined in Venezuela, Colombia, Ecuador, Guatemala, and Mexico.
- $5.25 Billion: The expansion of the Panama Canal - can you believe that this "mega-project" is now in fourth place with regards to large projects being planned or executed in Panama? The money that will be spent to expand the Panama Canal will all be spent here and will go straight into the local economy to pay for materials, labor, services, equipment, fuel, etc.
- $4 Billion: Real Estate "Boom." This is probably now a conservative number, but it's the most recent one I've heard. It represents the total value of investment to build all of the 400+ projects currently in some phase of execution or planning in Panama. And again, this number will continue to grow as more projects are built and delivered and the builders move on to the next project. Also, if it costs me $100,000 to build an apartment and I sell it to you for $250,000, that $150,000 profit which is now in my pocket will be turned back into the economy in some form, as an investment, capital, or what have you. Almost all of the residential construction projects are being built by Panamanian companies, or consortiums between Panamanians and foreigners. Much of the profits are staying in Panama.
- $2.5 Billion: Government spending on infrastructure upgrades not related to the Panama Canal. The administration of Martin Torrijos has modernized the tax system and is now enforcing the laws and collecting more revenue than ever before. Right now the Panamanian National Assembly is debating what will be the largest annual budget in the history of the Republic (2008) at more than $10 billion dollars total. The government is collecting more taxes and plowing that money back into development projects, roads, bridges, and other public works projects.
- $2+ Billion: Gold and Copper mining. There are several companies developing different properties for gold mining, and the Petaquilla project is potentially sitting on the largest copper deposits in the world. The government of Panama will receive 2% of the value of all minerals extracted. In addition, all of the money spent to develop and improve these sites is staying here in Panama. Mining in Panama is going to get very big and will grow in relative importance to Panama's economy.
- $600+ Million: The "mega port" project at Farfan has now been cleared of a legal hurdle thrown up by the Panama Ports Company (PPC) and can proceed. Panama has decided to prevent any company that is already operating a port in Panama from participating in the bidding process to build and operate the new "mega-port." The PPC unsuccessfully challenged that decision in Panama's Supreme Court, and the government of Panama can now proceed with the bidding process to select a design, builder, and operator.
- $500+ Million: The cleanup of the Bay of Panama. This is a massive effort to collect all of the rainwater runoff that falls on Panama City and drains into the Bay of Panama, and to clean that water of pollutants like garbage, sewage, debris, oils, etc., before it empties into the Bay of Panama. The project also includes an element of dredging to pull up much of the tons of trash and garbage that have washed into the bay over the years. Right now the companies that have won some of the initial bids are digging ditches and laying down pipelines that will feed the treatment plants in places like San Miguelito. And again, all of the money spent on this project is staying here, in Panama.
- $400+ Million: Panama canceled the contract they had let to the Partnership San Lorenzo to develop a Multimodal Industrial and Services Center (Cemis) in the city of Colon for breach of contract. The government will now let that contract to someone else. They did a similar move with the contract to extend the Northern Corridor, taking the contact away from Pycsa and giving it to the Brazilian company Norberto Odebrecht.
- "Nickle and Dime" Stuff: There are literally dozens of projects that represent multi-million dollar investments that are significant, but in this world of $40 billion dollar projects tend to fall off of the table. For example a company from Alaska is investing $3 million dollars to extract lumber from under the water in Gatun Lake. Many companies are moving their regional operations to Panama and investing millions here on buildings, equipment, personnel, and infrastructure.
All told, they add up to some real money: I'm sure there are some significant projects that I'm forgetting, but these are the majors. The amount of money that's pouring into Panama is increadible.
Jesus Barderas, head of the consortium, said he believed there was room for the project alongside at least two previously announced regional energy development deals.
Occidental Petroleum (OXY.N: Quote, Profile, Research) is planning to build a $8 billion refinery at Puerto Armuelles, on Panama's Pacific coast near the Costa Rican border.
Central American governments, working with private companies, have announced plans to to build a refinery in Costa Rica, Guatemala, Honduras or Panama, as part of a wider energy project.
The two energy parks in Panama would be linked by a 56-mile (90-km) long oil pipeline that would follow the route of the Panama canal.
The planned route for the oil pipeline would pass close to Gatun Lake, which supplies drinking water for many Panamanians and the water needed for the Panama canal.
The project would source oil from South America and bring it to markets on the both coasts of the United States, as well as the emerging markets of China and India.
"We want to take advantage of Panama's geographic position," Barderas said. "The country is equidistant between sources of oil production and the centers of consumption."
Talks are ongoing with BP Plc. (BP.N: Quote, Profile, Research), Total S.A. (TOT.N: Quote, Profile, Research) Petrobras (PBR.N: Quote, Profile, Research), Samsung and PetroChina Company Limited about their involvement in the project, consortium vice president Luis Marin said. (Editing by Christian Wiessner)