Panama Canal Pursues Projects to Diversify and Sustain Operations
The Panama Canal Authority shared its long-term vision with a series of priority projects designed both to expand and diversify its operations as well as enhance the operations and sustainability of the vital waterway. During a presentation of the plan, Panama’s Minister of Canal Affairs and the authority’s administrators emphasized that the effort is designed to reinforce the strategic role of the trade route.
Over the next decade, the Panama Canal Authority plans to invest more than $8 billion in strategic projects. One key focus is on water security, which calls for proceeding with the plans for a new reservoir that would provide water both for the canal and human consumption. The second portion focuses on expanding capacity through new transport systems and the expansion of infrastructure.
The Rio Indio Reservoir plan was developed in response to the drought, which limited operations in 2023 and 2024, as well as the long-term growth of the operation. The canal was forced to limit transits and reduce the maximum draft for vessels to preserve water during the drought. In addition to expanding water recycling, the next phase of the plan calls for the building of a new dam. The authority views it as a critical step, but the plan has received criticism in Panama due to the impact on the local communities.
The projected cost of the new dam and lake is $1.6 billion, with work on the dam scheduled to start in 2027. The new reservoir would be completed by 2032, but it will displace over 2,500 residents. The authority highlights that the budget includes $400 million in compensation.
The Interoceanic Energy Corridor is a cornerstone of the future business plan. It would be a 76-kilometer (47-mile) pipeline, making it possible to move 2.5 million barrels of energy products a day across Panama. Vessels would be able to transfer their cargoes from the Atlantic to the Pacific without having to make the transit. The plan calls for the construction of marine terminals on each side of the canal. They are continuing to discuss the products, but anticipate that liquefied petroleum gas, ethane, butane, and propane would be transferred through the pipeline. The goal is to rebuild LNG volumes, which fell dramatically in 2024.
The Board of Directors has approved the pipeline plan. The process includes prequalification of companies, technical dialogues, and preparation of the final terms for the bidding. They expect to proceed with the tender in the second quarter of 2026.
The authority is also moving forward with a pre-feasibility study for the proposed Corozal Port, which would be on the Atlantic side of the canal near Panama City. The authority has discussed plans for additional terminals as part of its expansion and to deflect some of the criticisms over the current terminals operated by the Chinese company Hutchison. They expect to proceed with the studies in 2026 and expect that construction for Corozal would begin in 2028.
Longer-term plans also anticipate a new Pacific terminal and facilities for both containers and RoRo cargo. A new road is also planned to cross the isthmus.
The planning comes as the canal has seen a rebound in volumes since the lifting of drought restrictions. The authority is projecting that the canal will have handled more than 500 million metric tons of cargo when the fiscal year ends on September 30. It will be up from the 423 million tons of cargo in FY 2024. Vessel traffic in the last two months has averaged just over 32 ships per day, up from a low of 24 during the restrictions, but below the current target of up to 36 transits per day.
The canal is projected to have a gross income of approximately $5 billion in this fiscal year. Last month, Panama’s cabinet approved the new fiscal year budget projecting more than $5.2 billion in gross income, with the canal project to contribute nearly $3.2 billion to the national treasury, an increase of more than $400 million.
The President of Panama, José Raúl Mulino, has repeatedly asserted the country’s sovereignty over the canal in response to the allegations from Donald Trump and the United States. They have rejected the claims that “China runs the canal” made by Donald Trump and have taken steps to further remove China’s influence, including challenging in court the concession granted to Hutchison. Talks regarding the sale of the terminals and Hutchison’s non-China port operations are reported to be continuing as they work to rebuild the deal to receive Chinese government approval.