Panama Canal expansion to be completed this weekend

IT’S one of the most remarkable construction feats on Earth and the Panama Canal has just undergone a new expansion project. But behind the scenes, all isn’t what it seems.

IT’S one of the most remarkable construction feats the world has ever seen. And now, the Panama Canal has undergone a $6 billion expansion project which is set to wrap up this weekend after seven years of work.

The renovations will double the canal’s capacity and bring in an anticipated hundreds of millions of dollars extra per year. But while Sunday’s grand reopening of the canal has been hailed as “one of Panama’s finest hours”, behind the scenes it’s been anything but smooth sailing, according to an investigation by the New York Times which has branded it a “risky bet”. So why did it need to be expanded? Let’s rewind for a moment. Work on the Panama Canal began in 1881 by the French and was temporarily halted due to engineering issues and a high mortality rate among workers. America took over the project and it officially opened in 1914; a huge deal globally. One of the most difficult projects ever undertaken, the canal’s purpose was to cut the time it took for ships to travel between the Atlantic and Pacific Oceans. It uses lock gates which are located at three places throughout the canal, and the vessels are lifted up to 26 metres above mean sea level as water is pumped into the lock chambers, before being dropped again on the other side. The locks determine the largest size that ships can be in order to pass through. As vessels were built bigger and bigger over the years, it became clear that the locks needed to be larger as well. So in 2009, the (at the time) financially distressed company Grupo Unidos por el Canal won a worldwide competition to build a new set of locks for the canal with a $4 billion bid, in order to fit more cargo in to the canal. The problem? It was a super-cheap bid for such a complex project, and trouble quickly brewed following the deal. “There is little room in the budget for execution errors or significant inefficiencies,” a confidential analysis commissioned by the consortium’s insurer, Hill International, in 2010 found. “This is a high-risk situation.” Ultimately, the construction was meant to take five years, but ended up running nearly two years late. First, there were reportedly internal arguments about how to divide responsibilities, then there were work stoppages and disputes over extra costs amounting to $4.5 billion. The design has come under scrutiny, including the thickness of the concrete lining the walls of the huge locks. It turns out they had budgeted for 71 per cent less concrete than that of the next lowest company bidding for the project — and a quarter less steel reinforcement. And last summer, water started running through the concrete, which was meant to hold for 100 years. The lock design has also been criticised for being too small and thus allowing little room for error; the water level is of concern for being too little and the tugboats are unstable. “The Spanish tugs are perfectly awful,” Iván de la Guardia, the head of the tugboat captains’ union, told the Times. Another problem is that it has come at a difficult moment for the international commercial shipping market. The drop in world oil prices, an economic slowdown in China and other factors have been affecting the canal’s traffic and income, which is a big problem seeing as it’s a lifeline for the small country. About a third of the canal’s traffic is between US East Coast ports and northern Asian ports. But that cargo traffic dropped by 10.2 per cent in 2015, and lower oil prices have allowed some shippers to use longer routes. And because of the canal’s size limitations, some shippers now go through the Suez canal. Canal Administrator Jorge Luis Quijano said the shipping market was cyclic, and would rebound. There are already 162 reservations for large-ship voyages through the new locks through December, and the new locks are expected to earn between $530 and $600 million in their first year of operation. “Things won’t stay at zero. The world will continue to grow,” Mr Quijano said. “Eventually there will be a rebound and the good thing is that we are prepared to take advantage of that when it occurs.” Mr Quijano said the current economic downturn may last one or two years. “We believe that the United States will see significant growth in the future for its new export capacity for natural gas and oil,” Mr Quijano said. “That is what we are betting on, and that is why I feel so optimistic that the canal will do well.” The renovations will double the canal’s capacity, tap new markets such as liquid natural gas shipments and cut global maritime costs by an estimated $8 billion a year. However, the canal authority insists the new locks are safe. Jorge Alexander Quijano Richard, the canal administrator’s son and a lawyer, said that in tests this week, workers were “performing the lockages with a high grade of precision and have maintained the highest standards of safety”. “This is one of Panama’s finest hours,” he added. “The country is elated.” news.com.au has contact Grupo Unidos por el Canal for comment. — With wires