Panama just recently started importing liquefied natural gas, or LNG, becoming the forty-second country to import this resource that is helping reshape global industries. Panama was already a important hub for international commerce and energy flows, and that role has been growing following the 2016 expansion of the Panama Canal to accommodate larger tankers and new shipping rules that allow vessels to traverse more frequently. Adding LNG storage capacity brings a new dimension to Panama’s energy profile. No longer is Panama just a pass-through for the energy trade, Panama is now making inroads to also be a hub for regional energy, an arrangement that will elevate its profile on the geopolitical energy stage.
Panama has established an LNG facility near the city of Colon, located on the Caribbean coast of Panama. The terminal, called Costa Norte, was built by the U.S. power company AES. Imported gas gets cooled to sub-zero temperatures where it turns into a liquid form then loaded onto tankers, and shipped overseas. The liquid gas, LNG, is then off-loaded to the Costa Norte terminal where it will eventually be converted back to gas form to provide the power to a 381-megawatt combined cycle plant to generate electricity. Commercial operations of the plant are scheduled to begin very soon.
Panama will immediately benefit from diversity in the energy supply and, in the future, may benefit other Latin American countries. Like most countries in Latin America’s tropics, Panama generates a majority of its electricity from hydropower. Gas will not displace hydropower entirely, but it will cut into the nearly 40 percent of the electricity that Panama derives from burning petroleum and heavy fuel oils. In addition to being cleaner-burning and lower cost than oil, gas will also smooth out any price volatility that arises from buying petroleum fuels during times of drought or low water supplies.
Panama seems to be following the successful Dominican Republic operational model. Although the Dominican Republic was more dependent on oil than hyrdopower, the use of LNG has helped them reduce their oil consumption for power by 51% over a ten year span. This has helped reduce costs and provide cleaner burning power. Panama is looking to change the way it generates power while also benefiting financially and ecologically.