Panama has the potential to become a major oil and downstream products redistribution centre for two main reasons: one is the existence of the Panama Canal creating a natural bunkering market as well as a transhipment point, and the other is the fact of being the narrowest isthmus between the Atlantic and Pacific oceans to pipeline oil from South America to the Far East. Companies already doing business in 8 petroleum free zones include Exxon/Mobil, Shell, Alireza/Mobil, Chevron/Texaco, Gencor and others.
a)The creation of eight (8) Hydrocarbon Free Zones, along with the privatization program of the national port system and the reversion of the ports and related military sites managed by the United States Army, until December 3, 1999, have permitted the establishment of petroleum terminals in order to supply vessels that use the national ports or vessels that transit through the Panama Canal.
These petroleum terminals are established within Hydrocarbon Free Zones and have been granted several privileges and tax incentives, as long as the petroleum derived from product is for international markets Besides the fiscal incentives, this Hydrocarbon Free Zone are completely equipped with storage tanks and facilities used for to supply and mobilize fuels to vessels or cistern truck.
Through Cabinet Decree Nº 36 of September 22, 2003, published in the Official Gazette No. 24,892 of September 22, 2003 Panama adopted a new National Policy for Hydrocarbons.
The Cabinet Decree groups within a legal document all the regulations, both domestic and relating to international markets, and regulates the activities of contractors users of free zones by the contractor, the users of Hydrocarbon Free Zones, the refinery plants, the electric generation plants, the suppliers of bunker fuel through the use of barges, the importers, distributors, exporters, the companies that mix the bunker fuel, independent inspectors and analysis laboratories.
Cabinet Decree N º 36 has been amended or supplemented by the following rules:
- Cabinet Decree No. 25 of September 29, 2008.
- Law No. 52 of July 30th 2008.
- Cabinet Decree No. 5 of April 13, 2005.
- Cabinet Decree No. 45 of December 15, 2004.
The Bahia Las Minas Petroleum Free Zone located in Colon is home to several projects.
Chevron (Texaco) doubled the capacity of its terminal by using tanks vacated after leaving the refining business in 2002. Since then, the tanks remained without any use. Investment is estimated at 10 million dollars, and storage was increased to one million barrels. This makes the company a candidate to become a recollection center for the Region. In addition to the marketing of products such as LPG (propane) gas, premium and regular gasoline, aviation fuel (jet fuel), diesel, asphalt and bunker, also servicing wholesale businesses and vessels transiting the Panama Canal and re-exporting petroleum products to Central America.
In late 2010 it was announced the start of operation of the oil-free zone Colon, located in the port of Manzanillo, the farm of four tanks and infrastructure of pumps and pipes, built by Columbus Oil and Services, SA (Coassa) with an investment of approximately $ 14 million, would be operated by the European company Oiltanking, a German company that has experience in business and which would become the operator of the facility.
There presently exists in the country 8 Petroleum Free Zones. Within any Petroleum Free Zone, individuals or corporations, national or foreign, may perform multiple operations under a special tax free regime, as follows:
a) Introduce, storage, manufacture, bottle, refine, purify, mix, market, transport, transfer, pump, process, transform, sell or in any other way dispose in the domestic market, export, reexport, provide and, in general, operate and manage crude oil, semi processed or any of its by-products;
b) Build, install and operate petroleum refineries and other transformation or processing means of crude oil or semi-processed, storage tanks, oil pipelines, gas pipelines and poly-pipelines, pumping installations and pipes, buildings for offices, warehouses, or workshops and any other installations; introduce machinery, equipment, spare parts, containers, bottles, vehicles, furniture, equipment for fire or spill prevention, construct buildings for offices, warehouses, workshops for the use of the beneficiaries of the contracts to operate in the Petroleum Free Zones in any of the activities mentioned insubsection (a) hereinbefore;
c) Lease, acquire or in any other manner use lands, easements, right of way and other real or personal rights in regard to bona mobilia located in the areas designated as Petroleum Free Zones;
d) Establish water services, electrical power, gas, energy, heat, refrigeration or any other kind of services, upon previous coordination and approval with the respective public entities;
e) Build ports, piers, dry docks, shipping and unloading places for ship and airplanes, railroad stations for loading and unloading on land or granting contracts for the construction and exploitation of such works; and
f) In general, all kinds of operations or activities proper or incidental to the establishment and operation of the Petroleum Free Zones for the introduction, storage, pumping, transference, distribution, marketing and crude refining and petroleum by products.
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There are other advantages arising from establishing this area: increasing supply availability to domestic market in the Isthmus of Panama, due to the amount of stored product. In addition to a more efficient management in distribution areas, that can also be supplied as El Salvador, Honduras and Guatemala. There is as well an opportunity to explore other markets to offer other related products creating several added values to this type of trade.