Panama Canal’s Tentative 6-Year Reservoir Plan Costs $1.6 Billion
The Panama Canal Authority (PCA) just cleared another hurdle to building a new reservoir aimed at helping the 50-mile waterway facilitate transit during drought periods.
A recent ruling by Panama’s Supreme Court allowed a re-interpretation of boundaries that could enable the waterway to expand outside its traditional watershed, thus allowing the canal to supplement the main supply of water from Lake Gatún. The artificial lake provides the water needed to move ships through the Panama Canal’s lock system, and was severely impacted by the months-long drought that occurred throughout 2023.
More from Sourcing Journal
Sportswear Industry Sees Solid Growth Ahead Despite Some Risks
Hapag-Lloyd Raises Profit Outlook Again Amid Ascending Freight Rates
Court Overturns FMC Ruling on Late D&D Fees-A Win for Ocean Carriers
The Indio River reservoir project would take six years and cost $1.6 billion, said the Panama Canal’s administrator, Ricaurte Vásquez Morales.
However, for the project to move ahead, authorities still must gain final approval from the roughly 12,000 people who live in the 200 villages around the Indio River basin. Of the $1.6 billion dedicated to the project, about $400 million would be invested to address the needs of those living in the neighboring communities, Vásquez said.
Assistant canal administrator Ilya Espino de Marotta believes those talks could take 1.5 years, with construction taking three or four years after that.
Vásquez has long been a proponent of the reservoir, which he has previously said would provide capacity for an additional 11 transits. According to the administrator, the canal waterway will require another long-term solution amid climate change and extreme weather events like El Ni?o, as well as population growth across the country.
Adding capacity for more vessels would alleviate some of the current concerns, but the plans appear to be more for stability in moving freight through the canal during drought conditions than expansion itself. Vásquez said the project “would provide a little more certainty to maintain 36 transits per day, a higher level of reliability for the route.”
In addition to the Indio River project, the ACP is exploring other alternatives to guarantee the water supply. “In the short term, this is a necessary first step, but it is not enough, that must be clear,” Vásquez said.
The drought-stricken Panama Canal has gotten a bit of a break in recent months as rain returned to the area, coinciding with the reversal of transit and draft restrictions that began to be implemented last July. While the waterway accepts 34 to 38 vessels per day under normal conditions, the number of daily transits allowed slowly dwindled down to 22 by December. The reversals began in January.
On Thursday, another set of restrictions was lifted that has brought daily transit reservations back up to 33. That number will be extended to 34 per day on July 22, and again to 35 slots per day on Aug. 5.
Additionally, the maximum ship depth for the key global waterway was lifted again to 47 feet on June 26, before being widened an extra foot to 48 feet Thursday. At peak, the canal’s limitations allow for a 50-foot draft to pass through.
Official water levels at Gatún Lake were 83.5 feet deep as of Thursday, which is 0.1 feet deeper than the 83.4-foot average since 2019, and a massive improvement over the 79.5-foot depth in July last year.
Given that Panama’s peak rainy season flows May to November, the lake’s water levels are projected to increase in the coming months, with the anticipated depth based on the prior five-year averages escalating every month through next January. In August, average water depth for the past five years stood at 83.9 feet, and rises even further to 84.2 feet in September.
The ACP expects the canal’s conditions to fully normalize by 2025 if rainfall continues as expected.
In June, the canal itself has facilitated its highest number of arrivals and transits thus far in 2024 amid the lifted restrictions, with 29.4 ships per day reaching the canal and 29 passing through on average. These are the highest average totals since October 2023, when there were 31.55 daily arrivals, and 32.55 daily canal transits.
With its reservation system firmly in place and more ships permitted to pass, the waterway is getting vessels through at a quicker pace as well. Canal waters time—the average time it takes a vessel to transit the canal, including waiting time for passage—sunk to 19.1 hours on average. This is the best result for the metric in 2024 thus far, and a major improvement over the 44.10 hours it took for a ship to traverse the canal in December 2023.