Panama Canal Plans Reservoir Expansion to Combat Next Drought

The Panama Canal is gearing up for a potential new drought that could impact its operations within the next four years. Canal chief Ricaurte Vasquez announced plans to expand capacity by accommodating larger ships, giving some vessels their own passage, and increasing water reservoir capacity. Despite facing severe drought conditions in the past fiscal year, the canal aims to increase daily passage capacity to 36 vessels with a maximum draft of 50 feet.

Vasquez highlighted the increased frequency of droughts and the canal’s reliance on rainfall from rain-fed lakes to operate its locks and separate the Atlantic and Pacific oceans. Despite implementing water-saving measures that resulted in delays for ships, the canal expects to meet its revenue target of $4.78 billion for the current fiscal year ending in September. Revenue for the next fiscal year is projected to be $5.6 billion, with improved transit rates due to heavy rains by November.

Preparations are also underway for a $2 billion expansion of a water reservoir, which is expected to take 18 to 24 months pending approval by Panama’s Supreme Court. The canal plans to engage with LNG producers and market participants to discuss the possibility of a dedicated passage for these ships. With a focus on operational efficiency and water conservation, the canal aims to maintain its tonnage capacity while avoiding disruption under a water-saving scheme.

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