Thanks to its long-term contracts, Panama will have a secure supply and stable prices

Savings from natural gas

Thanks to Generadora Gatún, a natural gas-based power plant which began construction this March, Panama has secured a 20-year fuel supply contract at a stable and competitive price for the market, generating savings of 20 percent compared to current market prices. This was made possible by leveraging gas from the United States, the world’s largest exporter of liquid natural gas, along with Qatar, which allows for the best price to be offered.

If we add to this new investment the savings generated by AES' Colón plant, the 381 MW natural gas-based plant inaugurated in 2018, this represents real savings for the country that exceed $150 million per year, compared to generation based on fuel oil and liquid natural gas at market prices, which comes out to approximately $3 billion in savings over 20 years. In addition to these economic savings, both investments allow for a reduction in CO2 emissions of more than 2,200 million tons per year between the two plants, as natural gas is a much more environmentally friendly fuel.

Efficient natural gas generation is key to responsible energy transitions, as the reliability gained from strong capacity allows for increasing renewable energies while dealing with their intermittency. Likewise, given that its price is affected by the international context and the geopolitical impact of events like the Russia-Ukraine war, long-term planning is essential for such projects. Long-term supply contracts are the key to combating rising energy prices and have proven to be a successful instrument for promoting necessary investments in the energy sector and guaranteeing the supply of demand at predictable and stable prices in the Latin American region.

Once the 670 MW of energy from Generadora Gatún enter operation in 2024, and thanks to its long-term contract, Generadora Gatún will reduce volatility in electricity costs and provide Panama’s electrical grid with high levels of reliability and stability. By securing its future alongside stable prices, Panama can continue to accelerate its transition to renewables with significant savings for the country, price stability, and even cost reductions from increasing the share of renewable energies. Thanks to the Colón contract, Panama has secured prices until 2025.

Timely government planning, to protect against price increases and to secure supplies, requires long-term contracts such as Generadora Gatún and AES' Colón plant, to ensure the reliability, affordability, and sustainability needed to accelerate energy transitions responsibly and fairly.

Liquid Natural Gas will play an important role in shaping the energy future of Central America and the Caribbean by diversifying the energy matrix and meeting the growing demand for sustainable and affordable electricity. With the Gatún project and AES' Colón plant in operation, Panama will benefit materially, achieving savings of approximately $3 billion thanks to long-term gas contracts, thus guaranteeing its energy security and accelerating its responsible energy transition.

Juan Ignacio Rubiolo

Executive Vice President and President, Energy Infrastructure