What is the Panama Canal authority planning for 2022?

The Panama Canal authority (PCA) is defining a series of water infrastructure solutions to secure supply for half of Panama City for the next 50 years. 

A new tender for the US$2bn water program is in the works, PCA deputy administrator Ilya Espino de Marotta told BNamericas in this interview. In 2020, a similar tender was launched but eventually canceled. 

Espino de Marotta also talked about the canal's budget, plans and traffic.

BNamericas: What are the priorities in terms of infrastructure for this year?

Espino: We have about US$400mn for infrastructure, 14% of our operating expenses in maintenance, and operating expenses are around US$1.4bn, so maintenance is very important, especially for a waterway that's more than 100 years old. We have everything [necessary for] maintenance, locomotive rails, we have more than 200 boats in the Panama Canal and 45 tugboats.

We have about US$1bn in investments, of which about US$440mn involve tenders.

One project we're carrying out that can be considered maintenance but is an investment project [relates to] the earthen dams on the Gatún lake dam. Among other things, the locks are well maintained and we have infrastructure projects for that. We want to consolidate facilities as part of our goal to become carbon-neutral by 2030.

We are trying to consolidate offices, one on the Atlantic and one on the Pacific [side] to try to minimize our footprint – 33% of our facilities would be consolidated in these areas. It's an investment project that we will be putting out to tender soon.

Another infrastructure project that we've planned is for new clear water locks in the Atlantic. When we built the third set of locks, an approach wall wasn't installed at the Agua Clara lock and after several years of operation we realized that this structure would be very beneficial for larger loops, which have more rapid transit.

Right now we have a tender out for purchasing 10 tugboats with an option for 10 more. We're also thinking of doing a photovoltaic project and an expansion of a water treatment plant. So those are the biggest projects we have, among others like docks. There's a control center that we're also about to [tender].

Some of these projects are already out for bids, others are pending specifications. They're always published on our procurement website. 

BNamericas: You're preparing a US$2bn tender to design, build and operate a water management system for Panama City by 2050. What does the project involve?

Espino: It's a project that's estimated at US$2bn and we think that in 2024-2025 there may be a tender ready. Right now, we are managing the process.

We have several projects with potential identified. With the US Army Corps of Engineers (USACE), with which we signed a contract in November 2021, we've begun to analyze the gap, and studies are needed to be able to refine and define what the project portfolio is because we think that perhaps this program won't require just one solution, but several, and as we identify these, one or more tenders will be issued.

These projects, which we've analyzed in a very conceptual way, comprise creating reservoirs within Gatún lake to have more storage areas and operate the lake at a higher elevation in non-traffic areas.

We're also seeing projects that can protect the basin beyond what we do today [and] the possibility of bringing new water sources to increase supply and not just storage. It's only been a few months since we started our contract with USACE, but we think that the contract could be extended until 2025.

BNamericas: A previous tender for the water program was reformulated due to comments from firms in the prequalification stage, but still cancelled after launch in September 2020. When will another one be ready?

Espino: Originally, we sought to create a slightly more open process so companies could give us proposals for water solutions, but the risk was greater for the companies than for the Panama Canal and the participants weren't willing to take that risk.

They didn't feel comfortable with that scheme. So, an internal analysis of alternatives was launched and we will put out a tender for the final design and construction. This scheme is the best received by the industry because it represents a lower risk for participants, as we will have a project already defined.

The original plan was for them to tell us what the best options were and in the approval meetings, they said they wanted something a little more specific and that is what we are doing now.

BNamericas: Are you looking at national players, private players or both?

Espino: It will probably be a component of international companies with some local companies and probably consortiums. If there won't be consortiums, there will probably be subcontracting. But definitely for projects of this magnitude there will be an international company involved.

BNamericas: So what’s the first priority this year?

Espino: Our priority is the water project, the consolidation of facilities and the project for the new control center system. 

Those are the priority projects. [The control center] requires a lot of digital transformation and we want to make some changes to make the process more automated, more technological. 

Regarding the water project, we also want to implement more technology. The consolidation of facilities is because we are going to leave behind that carbon footprint by 2030, just like the purchase of tugboats.

Those are the most important focuses that we have right now. We're also developing a new toll proposal that we will soon share with the industry; it has already been shared with customers and we will soon have a consultation. We want to simplify the canal's toll system.

BNamericas: Metro de Panamá is preparing to build a US$2.5bn, 5.3km tunnel beneath the canal for line No. 3. Are you involved in this process?

Espino: We're not involved in this project, but we do have to give authorization for compatibility with the activity of the canal. We will analyze the impact the project could have on the canal and if there's compatibility with the works the parameters that must be met are established.

BNamericas: The government also intends to resume construction of the fourth bridge over the Panama Canal this year. Is the process similar?

Espino: Correct. This also has to go through the process of compatibility to obtain its permit and there are certain restrictions on the type of construction. This is to guarantee that traffic won't be interrupted. 

BNamericas: How did you deal with the pandemic and how is the canal performing today in terms of traffic?

Espino: In 2020 we had two months where the transit of the canal was impacted by the pandemic. We had 28-29 daily transits, that is, there was an impact, but it was very short.

Our priority was to ensure that the workforce was in good health, to protect them from infections, which also helped to avoid interrupting traffic.

Surprisingly, the recovery of the transits was quite immediate. We've had fewer transits if we compare 2019 with 2020 and 2021. The number of ships has been decreasing, but the tonnage has been increasing, so there is less traffic, but more cargo.

By the way, we had queues of up to 100 ships waiting for 4-5 days. In other words, there has been high demand for the Panama Canal. Income has been increasing in 2020 and 2021 over 2019, but transit numbers have been going down.

I would say that in the markets we are seeing a decrease in liquefied natural gas, but [also] an increase in grain traffic, so we stay within the budget there.