Panama: Fuelling growth
The recent discovery of potential oil reserves in Panama could end the country’s need for costly fuel imports, at the same time that continued expansion in hydro-electricity looks set to meet demand over the next decade.
Panama’s thirst for energy continues to surge ahead alongside its robust economic development. Indeed, demand for both hydrocarbon fuels and electricity are anticipated to carry on climbing as the country continues to expand and diversify its economy.
Thus, news of potential oil reserves in August 2011 could be a major development in the country’s energy sector, as it has been forced to rely on increasingly expensive fuel imports in recent years. Although the country has historically lacked commercially viable oil and gas reserves, it does have considerable hydroelectric resources derived from the nation’s rivers, such as the Río Chagres and Río Chepo, which supply the majority of electricity to the national grid system.
The search for hydrocarbon reserves, which up until last year had proved futile, is vital to Panama’s energy security as it seeks to end its reliance on imported fossil fuels. A recent exploration survey conducted in August 2011 by OTS, a Venezuelan energy consulting firm, found that Panama may indeed hold potential oil reserves of 900m barrels. The prospective oil-bearing geological formations – the Bayano-Chucunaque-Atrato and Garachine-Sambu basins – in the Darien province are an extension of already producing basins on the other side of the border in Colombia.
Although the quality of the reserves has yet to be determined, Juan Manuel Urriola, the secretary of energy, estimated they could bring in $15bn in taxes and royalties over the next 20 years – a calculation based on OTS’s projections of an average oil price of $100 per barrel. Perhaps more significantly, the emergence of locally produced petrol would reduce the country’s reliance on imports, which have caused local fuel prices to rise in recent years.
It will be a number of years, however, before the deposits begin to yield results, as the bidding process has yet to take place. The government will likely follow OTS recommendations that the Bayano-Chucunaque-Atrato and Garachine-Sambu basins both be divided into four geological blocks for the bidding process, each of which will need further exploration to determine quality, volume and commercial viability. The bidding process for the eight blocks, originally expected to be complete by the end of 2011, will now be completed during 2012.
Until a domestic source of hydrocarbons comes online, Panama will continue to look to hydro-electric power to fuel its needs. After going through the process of privatisation in 1998 and 1999, the government relinquished control of the majority of the country’s electric power-generating facilities, though it did maintain command of the national grid operator, the Electricity Transmission Company (Empresa de Transmisión Eléctrica, ETESA).
According to figures from the secretary of energy, there are currently 18 electricity-generating companies in Panama, with a combined installed capacity of 1720 MW, though the grid generally loses roughly 24% of capacity, bringing the actual generation capacity to 1304 MW.
AES Panama leads the companies contributing to electricity generation with 28% (482 MW) of installed capacity, followed by Enel Fortuna with 17.4% (300 MW), BLM Corporation with 16.2% (278 MW), and TermoColon with 8.7% (150 MW).
ETESA is charged with managing electricity supply and ensuring growing demand is met. According to ETESA’s long-term expansion plans, electricity demand is expected to grow between 4.12% and 4.41% annually from 2009 to 2023 – increasing current electricity demand from 1304 MW in 2012 to at least 1949 MW in 2023.
All of the demand should be met by projects coming online during the next 10 years, with ETESA anticipating installed capacity increasing by 1623 MW by 2023. Hydroelectricity will continue to provide the majority of installed capacity, with 63% (1023 MW) of expanded capacity coming from hydroelectric plants. Hydroelectricity is followed by thermal, with 28% (450 MW) and wind with 9% (150 MW). Total investment in electricity-generation projects is estimated at $3.4bn.
With its recent discovery on the border of Colombia, Panama could soon join the list of oil-producing countries. Though the yet-to-be-determined reserves may not be as vast as other hydrocarbon producers in Latin America, they will be vital to local supply and could reignite the search for deposits in other areas of the country, and potentially even offshore.