19 May 2007 - 13:35
  • News Code: 104994

Qatar would join in constructing and supplying crude to a $7-billion project on Panama"s Pacific coast.

A proposal by Occidental Petroleum Corp. to build a refinery on Panama"s Pacific Coast moved closer to reality this week with the signing of a memorandum of understanding with Qatar"s state oil company to form a partnership to build the $7-billion project if feasibility studies prove positive.


In a signing ceremony Tuesday in Panama City attended by Panamanian President Martin Torrijos, executives of Westwood-based Occidental and Qatar Petroleum Co. said they would spend up to $20 million on engineering and cost studies in coming months and begin construction as early as February if the preliminary work pans out.


The project would be on an abandoned 3,000-acre banana plantation in Puerto Armuelles, a port city near Panama"s border with Costa Rica. Qatar would help supply the crude for the project and invest in a new 200-megawatt power plant, said Qatari Energy Minister Abdullah bin Hamad Attiyah, who represented his country at the event.


Representing Occidental at the signing was John W. Morgan, president of the company"s Western Hemisphere operations. If the project goes forward, it could be completed by 2012.


Torrijos has said the project would transform the poor, rural Puerto Armuelles area and lead to a flood of foreign investment in other energy-related projects. He has described the refinery as one of the three "motors" that could propel Panama into the so-called First World. The other two are the now-underway expansion of the Panama Canal and a free trade pact with the U.S.


But some observers fear Panama lacks the skilled manpower to build both the refinery and expand the canal.


Unless its educational system improves dramatically, Panama would have to import skilled workers from other countries, creating potential social problems, observers say.


Some skilled construction workers as well as building materials such as cement already are in short supply in Panama City, the capital, which is experiencing a building boom. Foreigners, including a wave of U.S. retirees and vacationers, are snapping up properties. Driven in large part by construction, Panama"s economy grew at a healthy 8.1% rate last year, though there is still 40% poverty and a wide rich-poor gap.


The proposed refinery would process 350,000 barrels of crude a day, producing gasoline and other fuel for Central America and the U.S. West Coast. The refinery would be the first for Occidental, which during its eight decades has focused on production, not refining or distribution.


Qatar"s energy minister said the project would give his oil- and natural gas-rich country a foothold in the Latin American market. Occidental and the Qatar state oil monopoly have long been partners in energy development. They are nearing completion of a huge natural gas project in Qatar called Dolphin, which later this year will produce 2 billion cubic feet of natural gas daily.


Occidental spokesman Richard Kline cautioned Wednesday that so far his company and Qatar have committed only to do the feasibility study. Occidental first unveiled the refinery idea in March 2006. Since then, its heavy oil field in Ecuador — which would have supplied crude to the project — has been seized by that nation"s government. The company still has fields in Colombia.


"It"s a study of costs and an analysis of what it will take to build and what [the refinery"s] capacity might be. It will answer the question of whether it should be done," Kline said.


Industry analysts and governments in the region as well as experts at the Inter-American Development Bank say refining capacity is sorely needed. Two other refinery projects have been discussed for Central America, including one pitched by Venezuelan President Hugo Chavez. Central American nations currently import the bulk of their gasoline by truck from Mexico.


The refinery would process heavy crude offloaded at Puerto Armuelles or on the Caribbean side of Panama before being pumped by an existing pipeline across the isthmus.


The cost of the project would equate to nearly half of Panama"s annual economic output of $15 billion. Last year, Panamanian officials said the project might generate 15,000 construction jobs, then 6,000 direct and indirect jobs once completed.




News Code 104994

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