US targets Panama for energy investments and regional LNG hub

The two countries have signed a memorandum of understanding to foster private investments in energy infrastructure, including a new 381MW gas-fired power plant.

The US is aiming to increase energy development in Panama, signing an agreement that aims to turn the Central American country into a regional hub for liquefied natural gas distribution.

David Malpass, US Treasury under-secretary for international affairs, was in Panama City on Friday to sign a memorandum of understanding between the two countries to increase private investment in energy infrastructure. Malpass also attended a ribbon-cutting ceremony at a new 381MW gas-fired power plant built by US power company AES in Colon.

The agreement will allow US agencies to help address regulatory issues and other barriers to private investment in Panama’s energy market. In addition to LNG imports, Malpass said the US hopes to use Panama’s position in Central America and its access to the Gulf Coast as a distribution hub to transfer LNG to other countries in the region.

“This framework will expand energy security and spur economic growth for both nations. It will help catalyse private sector capital for investments across the energy value chain, including upstream energy production, as well as power generation, transmission, and distribution,” Malpass said in a statement.

Many countries in the region depend on Venezuelan oil as a primary energy source. Malpass said the US wants to provide these countries with a cheaper, cleaner alternative.

The $1.15 billion AES project is also expected to be used as a distribution terminal, sending US LNG cargo to neighbouring countries including Guatemala, Honduras and Nicaragua. The facility which received its first LNG shipment in June, is expected to begin commercial operations next month and start distributing LNG next year.

The US-Panama agreement also calls for increasing electricity access in rural parts of the Central American country and investment in new technologies such as battery storage to improve grid reliability.