Watching The World: Panama popping with possibility

Jan. 19, 2009
Panama has been out of the news for a while, but the oil and gas industry has plans for the place, and those plans are moving ahead smartly.

Panama has been out of the news for a while, but the oil and gas industry has plans for the place, and those plans are moving ahead smartly.

Panama’s trade and industry ministry recently said that studies are almost finished for the construction of a 350,000 b/d refinery at Puerto Armuelles, about 550 km west of Panama City.

In 2007, the Panamanian government agreed to cooperate with Qatar Petroleum and Occidental Petroleum Corp. in the project, then valued at $7 billion, and the two companies commissioned Foster Wheeler Ltd. to conduct the studies.

Since then, Tesoro Corp. has entered the country with a throughput agreement that will allow the company to transport crude oil through a pipeline owned by Petroterminal de Panama (PTP).

Last May, PTP unveiled a plan to reverse the flow of its 130-km trans-Panamanian pipeline, built in 1982 to allow Alaska North Slope (ANS) crude to be shipped to US Gulf Coast refineries.

Mothballed line

The 800,000 b/d line was mothballed in 1996 as falling Alaskan oil production made ANS crude noncompetitive on the Gulf Coast. Eventually, PTP got the idea of reversing the line to allow oil from the Atlantic to be pumped to the Pacific.

The idea may have come from Venezuelan President Hugo Chavez, who once expressed interest in using the PTP pipeline to help ship his country’s crude to China as a way of diversifying exports away from the US.

Chavez is out of the picture now, and PTP expects the reversal project to be ready for start-up during the third quarter of 2009.

The proposed reversal could shave 30 days off the transport of a crude cargo from West Africa to a US West Coast refinery—an idea that struck home with Tesoro.

Tesoro’s agreement

After the completion of the project, Tesoro has agreed to ship 107,000 b/d of crude through the pipeline under a 7-year agreement.

The throughput agreement will allow Tesoro to economically deliver crude produced in Africa, the Atlantic region of South America, and the North Sea to the company’s five Pacific Rim waterborne refineries.

Tesoro leases existing tankage from PTP but, in an added development, PTP is building dedicated tanks for Tesoro on both sides of the Isthmus of Panama, scheduled to be online in early 2010.

In September, PTP awarded CB&I, The Woodlands, Tex., a contract worth more than $40 million to design, fabricate, and construct petroleum storage tanks associated with the Trans-Panama Pipeline Expansion Project.

The tanks will be built at Chiriqui Grande on the Atlantic Coast and Puerto Armuelles on the Pacific Coast. Tesoro plans to use the pipeline and tanks to blend and distribute different grades of crude for its own use.

Not surprisingly, Tesoro Chairman, Pres., and Chief Executive Bruce Smith said, “This project is consistent with our strategic goal to increase optionality around crude oil selection.”