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Exploration of Risk Paper

In: Business and Management

Submitted By clyservices
Words 8572
Pages 35

Presented to: R. Hiles PM595
Prepared by: Carlton D. Clyburn Jr.


I. Introduction 3

II. Exploration of Risks 4

III. Fault Trees 4

a. Fault Tree: Project Completion Delay 5

b. Fault Tree: Changes in Cost Projections (Overruns) 6

IV. Conclusion 7

V. References 8

Construction of a third shipping lane through the Panama Canal has begun and it is a collaboration of contractors and manufacturers from around the globe working in unison to exacting concrete and design specifications. The Panama Canal’s third lane expansion involves building enormous new locks that will accommodate the new generation of shipping vessels that are about three times the size of “Panamax” ships constructed to fit precisely in the existing canal’s lock chambers. According to the vessel glossary of the World Trade Ref, the Panamax is defined as:
“An ocean-going cargo vessel of the maximum size possible to pass through the locks of the Panama Canal, which are 1000ft long by 110ft wide and 85ft deep. These vessels are typically of 50,000 to 80,000 dwt, 965ft (290m) in length; 106ft. (32.3m) beam; and 39.5ft (12.04m) draft.”
The new locks on the Atlantic and Pacific entrances will consist of a trio of chambers measuring 1400ft (427m) long, 180ft (55m) wide, and 59ft (18m) deep.
When completed, this construction will expand the capacity of the current fully-booked shipping route from Asia that, for years, sent cargo that couldn’t fit through the existing canal to the west coast where other ports have been overburdened; after landing in these ports, the freight had to make an expensive journey by road and rail over land. The newly constructed locks will allow bigger ships and more cargo through the canal and to the Gulf and East Coast ports, which will also create an economic boost to port cities with new jobs created as a result of more goods hit land and head to their destination. US grain exports through the Gulf and east coast will become more competitive, as will Gulf crude oil and natural gas from the nation’s growing industry.
In a project of this magnitude, there are going to be risks that are taken in order to successfully complete the expansion. Risks need to be explored in order to be able to properly manage and minimize the risks associated with the project. The Panama Canal Authority (ACP) is the governing body associated with this project that has exclusive charge of the operation, administration, management, preservation, maintenance, and modernization of the Panama Canal, as well as its activities and related services.
Exploration of Risk
Exploring risks in project management is important to the success of the project so that risks can be identified, analyzed, monitored, and minimized during the lifecycle of the project. In exploring risks, there needs to be systems of analysis that is used when communicating, managing, and minimizing risks in the project. The importance of the systems is to analyze and assess technical risks and hazards of the project. Proper technical analysis tools are used to strengthen the general risk management process, while improving on the effectiveness and efficiency in many instances. These analysis tools are also used in the risk identification and assessment stages and are often associated with safety and environmental risks as well. In exploring this project, Construction of the Third Shipping Lane through the Panama Canal, the following risks were identified for detailed quantitative modeling: * Project completion delay * Recruitment and retention of quality and quantity of skilled labor * Changes in cost projections (Overruns) * Changes in project definition, scope, or design * Channel disruption
These five identified risk are categorized in two different categories, which are administrative & operational and execution. In this report, there will be two risks explored out of the execution category. The first risk that will be explored out of the execution category is Project Completion Delay, which is also perceived to be the largest risk. The second risk that will be explored out of the execution category is Changes in Cost Projections (Overruns).
Fault Trees
A fault tree analysis is an important tool, while exploring risks, for risk assessment with significant extensions into quantitative aspect of risk analysis. It is a tool used for identifying and representing the logical combinations of causes, system states and risks that could lead to or contribute to a specified failure top event. This is the tool that will be used to explore the two risks.
Project Completion Delay
Material Delay
Natural Events
Contractor Issues
Equipment Problems
Labor Disputes
Extreme Temperature
Storm, Flooding
Landslip, Subsidence
Project Completion Delay
Material Delay
Natural Events
Contractor Issues
Equipment Problems
Labor Disputes
Extreme Temperature
Storm, Flooding
Landslip, Subsidence
Fault Tree: Project Completion Delay

As mentioned above, project completion delay is perceived to be the largest risk to the expansion project. There are various reasons why a project may be delayed, but in the case of the Panama Canal expansion project there have been two major reasons that have been identified. The two reasons that the project may be delayed are materials delay and natural events. The circumstances behind these events taken place can’t be avoided at times, but they can both be mitigated with a solid risk management plan. As presented by the above fault tree, under each reason for the project completion delay are situations that have caused them to happen. Materials are defined as anything that is used in accomplishing an objective or used to make a product. In the expansion project that key materials are the contracted services, equipment, and labor to construct the expansion. When putting together the WBS, there needs to be attention paid to all three of these factors and there needs to be a management plan in place to help maintain and minimize any unwarranted delays as well as systems in place to deal with them if they do arise.
Natural events are the events that there is no control over, they happen naturally and can only be taken in account for. Some of the natural events that may affect the completion time are extreme temperatures, storms and flooding, and landslides.
Fault Tree: Changes in Cost Projections (Overruns)
Changes in Cost Projections (Overruns)
Material Costs
Labor Costs
Market Price Increases
Vendor Shortages
Poor Estimates
Supply and Demand
Changes in Cost Projections (Overruns)
Material Costs
Labor Costs
Market Price Increases
Vendor Shortages
Poor Estimates
Supply and Demand

Change in cost projections (overruns) is when the amount of the actual cost of the project exceeds the amount that has been budgeted for the project. This does not guarantee the failure of the project, but it does make the success of the project more difficult. According to the fault tree above, there are two reasons identified to cause this situation to happen; they are materials cost and labor cost. There are numerous reasons that would lead to materials and labor cost to increase; for the expansion project, there are a couple that have been identified. The reasons that materials cost could rise are when the market price of the materials increase and when there are vendor shortages in the area and the materials need to come from further distances in which the prices are increased. There is no way to control market price for materials, therefore there needs to be safeguards set in place that will help control the costs in the case of materials pricing increase, in which the risk may be shared. There is also no way to control more locally vendors that provide the materials and therefore attention needs to be paid in budgeting and researching vendors that provide the materials necessary for this project.
In terms of labor costs, there may be poor estimates caused by unreliable historical trends, inherent biases, or actual labor prices may be significantly higher, which will cause an unfavorable variance from the budgeted amount. Supply and demand has also been identified as factors in higher labor costs; if a shortage of workers exist that are qualified and able to perform the work that needs to be done, there will be a relatively higher labor cost.
There are many benefits in completing this expansion project as this is a huge project in magnitude. There have to be risk management plans in place to assist in the successful completion in the project.

Cooper, D., & Stephen, G. (2005). Project Risk Management: Managing Risk in Large Projects and Complex Procurements. Southern Gate, Chichester. John Wiley & Sons, Ltd.

Shexnayder, CJ. (2012, October 11). Panama Canal: Full tilt in the tropics. New Civil Engineer. Retrieved from

Falchek, D. (2012, September 23). Panama Canal expansion could boost NEPA’s economy. The Times Tribue. Retrieved from

Milson, M. (2009, April 13). The Expansion of the Panama Canal: An opportunity for triumph or perilous blunder?. COHA. Retrieved from

Construction Assured: Governance and Risk Mitigation on the Panama Canal Expansion. (2011, May). RICS, Volume 1, Issue 5

Construction of a third shipping lane through the Panama Canal is underway. It involves contractors and manufacturers across the globe working to exacting concrete and design specifications. CJ Schexnayder reports.
Just over a century ago, Lieutenant Colonel William Siebert would begin his day by walking to a windswept office building overlooking Limon Bay on Panama’s Caribbean coast. Each morning the division engineer for the ambitious Panama Canal project would be met by a group of children whose parents worked on the enormous project.
The children, Siebert later recalled, would “proudly inform him of the number of cubic yards of concrete that had been placed in the locks the day before”.
Siebert’s task, as outlined in his 1915 book The Construction of the Panama Canal, was to oversee the building of the massive concrete structures required for the waterway’s Atlantic entrance - the Gatun locks. At peak production 2,300m3 of concrete was being placed per day - almost double the previous world record rate set months earlier by the works on the Pacific side.
“No structure in the world contains as large an amount of the material,” he boasted.
Larger structure
Today, a larger structure is in the process of being built alongside Siebert’s masterpiece. The Panama Canal’s $5.2bn (£3.25bn) Third Lane Expansion involves building enormous new locks that will accommodate the new generation of shipping vessels that are almost three times the size of “Panamax” ships constructed to fit precisely in the existing canal’s lock chambers.
The new locks on the Atlantic and Pacific entrances will consist of a trio of chambers measuring 427m long, 55m wide and 18m deep. A series of water saving basins is being constructed adjacent to the locks that will reuse 60% of the fresh water used in the lock system.
Just as the placement of the concrete for the lock structure was one of Siebert’s most difficult challenges in 1910, so it is today. The 2,300m3 per day the children were so proud to inform Siebert about in 1910 has been dwarfed by the 3,500m3 of concrete being put in place daily on the new Atlantic locks. A total of 5M.m3 of concrete will eventually be needed to erect the new lock structures.
“The locks contractor is scheduled to finish the locks themselves in the first quarter of 2014,” says the canal’s administrator, Jorge Quijano. “Then they will begin the installation of valves, gates, electrical systems and controls, followed by testing of these elements in the dry.”
The start of the Third Lane Expansion began with a public referendum in October 2006 when more than 80% of Panamanian voters approved the project.
Within a year, work began on the dredging and dry excavation portions of the project required to widen and deepen the waterway’s navigational channel and ocean approaches to accommodate post-Panamax-sized vessels.
Design and build
The design-build contract to construct the new locks on either end of the canal was won by Grupo Unidos por el Canal in July 2009. The consortium Grupo UPC is composed of Spain’s Sacyr Vallehermoso, Italy’s Impregilo, Dutch contractor Jan De Nul and Constructora Urbana of Panama. Its bid came in at £2bn, the only one of the three offers submitted that was below the canal authority ACP’s allocated price of £2.17bn.
The first phase of the work involved excavating the area for the construction of the new locks. On the Atlantic side that has required the removal of 15.2M.m3 of material, and 11.3M.m3 on the Pacific side, with most of the latter requiring blasting to excavate. These works were mostly completed by the beginning of this year.
At the same time, Grupo UPC enlisted CICP Consultores Internacionales, a joint venture led by MWH in partnership with California-based TetraTech and Iv-Infra of the Netherlands to design the locks and conduct 3D computer model simulations to ensure their functionality.
The extensive computer and scale model testing were necessary due to several revolutionary features of the project. Not only are the locks enormous, they also feature a system of water-saving basins, a lateral filling and emptying system that will allow the re-use of water for every transit. ACP expects that the basins will reduce the amount of water used in the locks by as much as 60%, taking barely as much as the old locks use today.
Another dramatic difference will be the use of rolling gates that slide in and out of housings built perpendicular to the lock chambers themselves. The old locks feature mitre-style gates that swing outward to allow ships to pass.
In 1915, the chief engineer of the original canal construction, George Washington Goethals, was called to testify in front of the US Congress concerning the costs of the waterway’s construction. The legislative committee asked him if he had expected there to be delays in completing the project.
“The new locks will only have one lane. Any closure of either of the locks would put the post-Panamax system out of service”
Cheryl George, ACP
“I anticipated that there would be some,” he testified. “In a big job you can not help it.”
Goethal’s maxim seems to be holding true for the third lane expansion as well. Although Grupo UPC was scheduled to begin concrete placement in January last year, the effort was delayed when the mixes Grupo UPC produced failed to comply with the stringent specifications.
According to ACP the contractor initially opted to use pozzolan in the mix, which made the concrete excessively permeable and unable to meet the 100-year standard set for the project. Eventually, Grupo UPC opted to use silica fume, which brought the mix up to the ACP standards.
The high design standards were necessary to reduce the risk of having to close the locks in order to undertake repairs to the superstructure. “At the existing locks we have two lanes of traffic, which permits outages for maintenance without closing the entire canal,” says ACP design manager Cheryl George. “The new locks will only have one lane. Any closure of either of the locks would put the post-Panamax system out of service.”
The need to change the concrete admixture pushed back initial concrete placement by six months to July 2011. In April 2012, Grupo UPC notified ACP that it would not be able to complete the work on the project until April 2015 - around six months behind the target date.
Canal officials had initially hoped to open the new locks for operation in October 2014 to coincide with the waterway’s 100th anniversary, and then commission them by the end of the year. The new timeline pushes that back by at least three months, says Quijano.

Contractural penalties
There are contractual penalties of as much as $300,000 (£187,000) if Grupo UPC cannot complete the work on time, with a cap at £21M. In addition, the contractor can be fined up to £125M if the locks fail two critical performance tests when completed: the time needed to fill the chambers and the time required to open and close the rolling gates.
The issue was muddied further in August when the consortium filed a claim against ACP for an additional £358M for the work - an 18% increase in the cost of the project. The canal authority is currently evaluating the claim. If it rejects it, the matter could go before an international tribunal.
The construction of the locks themselves is proceeding in an almost identical manner to that of a century ago. Siebert’s plan involved building each section of the lock chamber walls as individual concrete structures referred to as “monoliths.” In July the first monolith was completed on the Pacific side. Measuring 33.84m high, 7.5m wide and 27m deep, the structure required 232t of reinforcing steel and 2,605m3 of concrete. A total of about 50 “monoliths” will make up each lock chamber.
Due to the enormous amount of concrete the job requires, a key complication for the project has been the acquisition of quality aggregate to meet the huge demands of the work effort. Initially, the abundance of basalt on the Pacific side of the isthmus led ACP engineers to predict that the dry excavations for project would be sufficient to meet the demand. When the quality of this material proved insufficient, an quarry operation was set up nearby to procure higher quality basalt.
Another hurdle was the almost complete absence of aggregate on the Atlantic side of the isthmus. As a result, an inter-canal transport system was developed to take material from the Pacific side of the project to the Atlantic. More than 1.5M.t of material has been transported through the canal for this purpose
Each lock site is equipped with crushing plants that then reduce the material to the desired size of aggregate needed - including the fine sand production.
One of the primary mixes being used to build the locks requires an unusual 38mm to 76mm aggregate. This has proven tricky to place and hard wearing on the equipment.
On site batching plants
Concrete production is handled by on-site batching plants manufactured by Italy’s Simem. These feature a customised aggregate cooling system, which is necessary to control the energy dissipation of the exothermic heat generated during the concrete curing process.
When it is poured, the concrete must be between 7.7°C and 12.7°C. To accomplish that the aggregate stockpiles are protected from the tropical sun by a massive tent. The material is then water cooled before being transferred to the air-conditioned bin. Flake ice is introduced to the mix on the main feed conveyor allowing it to remain chilled as it is transported by agitator trucks.
Even more rigorous quality standards are implemented for a marine concrete mix being used on the portions of the locks that will be exposed to water. This concrete must meet compressive strength and contraction standards while also guaranteeing low permeability so that the reinforcement will not become exposed to water over time, causing it to corrode.
The concrete placement is primarily done by a small fleet of telescopic conveyor trucks with a reach of up to 60m. These units are complimented by truck-mounted concrete boom pumps, which are then used to place the concrete in hardest to reach locations. All this equipment takes up valuable workspace on the floor of the locks, so large volumes of concrete are placed using a system of four tower crane-mounted conveyors. Manufactured by the US firm Rotec, these conveyor systems are loaded from the lip of the excavation far above the main work area, and deliver a maximum placement rate of about 100m3 per hour.
Although the focus of the work at this point is on the concrete superstructure, significant amount of electro-mechanical work is underway as well, particularly the installation of valves to control the ingress of water to the lock and the massive rolling gates.
South Korean valves
The more than 150 valves required for the locks are being fabricated off-site at a Hyundai Samho Heavy Industries facility in South Korea.
Once complete they are shipped to Panama and placed in the lock structure itself. The work on the hydraulic cylinders that will move the valves up and down is already underway at the site itself.
At the Pacific end of the canal a new access channel is being constructed around the entrance to Miraflores Lake. The channel avoids existing locks and will carry the canal 11m above the level of the lake. As a result, huge dams are being built along the west side of the access channel to contain it.
The massive rolling gates that are the key to the new post Panamax locks are being manufactured at the Cimolai facilities in Pordenone, Italy. The gate’s panels are being produced in South Korea and then shipped to Italy where they are assembled into the massive blocks.
A total of 16 of these blocks will then be assembled into the individual gates. When completed, each of the gates weighs about 3,100t and measures about 30m high, 10m wide and 58m long.
When four gates are completed, they will be shipped to Panama and prepared for the two month installation process. ACP officials say the first gates could be ready to be placed in the locks in the first quarter of next year.
US big beneficiary of Canal expansion
Oct 1st, 2012 by The Bulletin.
The recently retired head of the Panama Canal Authority, Alberto Aleman Zubieta, says US East Coast and Gulf ports will benefit most from expansion of the Canal which should be fully operational in 2015.
Aleman Zubieta spoke at the South Carolina International Trade Conference on the Isle of Palms.
He said work to deepen the Canal and build larger locks continues around the clock. The Canal is being expanded to handle larger container and other ships that will soon dominate world trade.
Aleman Zubieta says when the Canal is completed, US grain exports through the Gulf and East Coast will become more competitive, as will Gulf crude oil and natural gas from the nation’s growing industry.
US ports are racing to deepen their harbors to handle the larger ships.

Panama Canal explansion could boost NEPA's economy
By David Falchek (Staff Writer)
Published: September 23, 2012
A massive construction project thousands of miles away could be a boost to Northeast Pennsylvania's economy.
The Panama Canal expansion, when completed in 2014, will expand the capacity of the now fully-booked shipping route from Asia. For years, cargo that couldn't get through the canal went instead to the west coast where it overburdened those ports. Then freight had to make the expensive journey by road and rail over land.
Once competed, the new locks will allow bigger ships and more cargo through the canal and to Gulf and East Coast ports. Some economic developers and port administrators expect a "canal effect," an economic boost to port cities with new jobs created as more goods hit land and head to their destination.
While quite a distance from ocean ports, Northeast Pennsylvania, is a logistics hub and may benefit from busier eastern ports.
"The expansion of the Panama Canal will diversify points of entry into the U.S.," said John Cognetti, president of the Penn's Northeast, the regional economic development marketing firm. "Everyone is jockeying for position and we need to be ready."
Ready for what? No one is exactly sure.
Local economic developers and the logistics professionals take a hopeful, yet wait-and-see, stance on how the Panama project will benefit the Pennsylvania economy.
The sector, which includes transportation, warehousing, and distribution, is growing even without the canal, noted James Cummings, spokesman for Mericle Commercial Real Estate. Any impact from the canal could be "icing on the cake."
"All great roads meet here: we have active rail, foreign trade zones, and investment-grade, high-ceiling industrial space," Mr. Cummings said. "We are better prepared now for something like this than we have ever been at any time."
Dick Kane, chief executive officer of Scranton-based logistics firm Kane Is Able Inc., said while the industry expects an influx of freight to the east coast, he's not sure how it will manifest itself here.
"This is a fantastic development for East Coast shipping in general," Mr. Kane said. "From a strategic position, Northeast Pennsylvania is very favorably situated."
Key ports that could have an impact on Northeast Pennsylvania - Philadelphia and New York/Newark - are bracing for huge increases in cargo shipments.
The increases could lead to more jobs in the area and make logistics an even more important sector of the region's economy. Logistics, which includes shipping, transportation, distribution and warehousing, is one of the largest private employment sectors in Northeast Pennsylvania employing more than 17,000 and could get much bigger.
Fully booked
Goods from Asia make their way to and through North America two ways. Goods headed for the East Coast could go through the Panama Canal while those for the rest of the country could go to the West Coast. As cargo ships grew larger starting in the 1980s, the famous canal has been inadequate for modern shipping.
"The Panama Canal has been obsolete since the 1980s," said Aaron Ellis of the American Association of Port Authorities in Alexandria, Va.
"The canal will soon be able handle ships three times the size of those going through the canal today."
The largest ships the canal can accommodate carry just one-third the freight of the today's vessels. Known as Panamax (Panama maximum) ships, they and carry up to 4,400 shipping containers. The containers, known as TEUs or 20-foot equivalent units, are roughly the size of a standard 20-foot intermodal container, designed to be transferred from ship to train or trailer.
Larger ships, known as post-Panamax, lug 12,600 containers, but are too big for the canal. Same for even larger Super Post-Panamax ships. The bigger the ship, the greater the fuel savings.
Shut out of the canal, Post-Panamax ships have made the ports of Los Angeles and Long Beach the busiest ports in the nation. The trade-off is that goods from Post-Panamax ships to the East Coast is a long, expensive journey. After unloading on the West Coast, cargo makes the journey by truck or train to its destination. With 60 percent of the U.S. population east of the Mississippi - the land bridge can be fast, but also costly.
Third set of locks
The Panama Canal expansion will solve those problems when the new set of locks open to post-Panamax ships.
Those ships will need East Coast ports to unload. So eastern ports scramble to upgrade and avoid becoming obsolete. According to a report in Port Strategy magazine, East Coast ports are spending about $800 million on dredging harbors to 50-feet deep, required to host a fully-loaded post-Panamax ship.
"There's no question we have to root for the Port of New York," Mr. Cognetti said.
Operated by the Port Authority of New York and New Jersey, the port finished its navigation deepening project and is focusing its attention on the Bayonne Bridge. A fully loaded post-Panamax ship can make it under the bridge and into the harbor, but, once unloaded it is taller, topping 210 feet, and would not be able to make it out.
The Port Authority is spending $1 billion on an engineering feat: building a new roadway on the Bayonne Bridge that is 50 feet higher than the existing roadway. Enough to allow an unloaded post-Panamax ship to leave the port.
"The Panama Canal project is huge and it will have worldwide implications," said James R. Brennan, Ph.D., Partner in Norbridge, Inc., a Reston, Va.-based consultant. "This is an extraordinary long voyage, and ships this size make it easier and cheaper than shipping over land."
The exact impact on the local economy is hard to tell. Yet, inquiries have already come into the Monroe County, said Chuck Leonard, Executive Director for Pocono Mountain Economic Development Corp, relating to the anticipated rush of cargo passing through the Poconos. "These ships are coming our way and we have to consider how we can position ourselves to take advantage of it and whether our communities make the right investments," Mr. Leonard said. "Even if we don't see a direct impact of new businesses and spin-off companies, our incumbent firms will benefit."
The increased shipping activity on the East Coast isn't just about imports and logistics. It can also be a boon for exports, including those manufacturers who think exporting is too complicated or expensive, Dr. Brennan said.
All those big ships dropping off Asian goods in Philadelphia or New York don't want to go back completely empty. Domestic producers will be able to take advantage of low shipping rates.
"The company that has been leery about exporting will, or is already, finding opportunities," Dr. Brennan said. "As they look for back-haul cargo, they will offer sweet deals to companies."

The Expansion of the Panama Canal: An Opportunity for Triumph or a Perilous Blunder?
BY COHA Research Associate Maya Wilson
– Posted on April 13, 2009
 Canal expansion project well underway, however benefits remain questionable
 Skepticism coupled with environmental and social concerns cloud project
 Accountability in social programs needed to ensure citizenry benefit from expansion
 Bernal has fought for civic rectitude when it has come to contesting canal expansion plans

The Republic of Panama, a mountainous isthmus located in Central America, is most notably recognized for its canal connecting the Caribbean Sea and the Pacific ocean. The passage was transferred from U.S. to Panamanian control on December 31, 1999, and has since been managed and operated by the Panama Canal Authority (ACP), a Panamanian government entity. In addition to providing a major source of the country’s gross domestic product (GDP), the canal continues to function as an invaluable maritime passageway handling 5 percent of worldwide trade, with approximately 14,000 ships passing through its channels every year. Considered by many as being one of the most elaborate engineering projects ever undertaken, the future success of the waterway is largely contingent upon the facility being widened, which will enable it to keep pace with the enormity of modern day cargo vessels and oil tankers.
Overwhelming Public Support for the Expansion
In an October 2006 nationwide referendum, Panamanians overwhelmingly approved (by a 76.9 percent vote) an ambitious plan to widen the canal. According to Panamanian president, Martin Torrijos, an outspoken supporter of the canal expansion project, “never in the history of the country have we Panamanians taken a decision of this magnitude.” Torrijos stresses that the expansion of the canal, which is expected to cost at least $5.2 billon, is vital because the waterway is currently inadequate to accommodate both modern tankers and big cargo vessels. The project began in September 2007 and is expected to double the conduit’s capacity, enabling it to accommodate ships that are currently too large to navigate its 108 foot-wide locks. Furthermore, the Torrijos administration claims that the project will create tons of thousands of jobs and will bring a much needed boost to the country’s ailing economy. Of course, not all Panamanians were ebullient after the Canal’s expansion. Some, like Dr. Miguel Antonio Bernal, a distinguished professor at the University of Panama, fought the expansion as a boondoggle bound to throw open the door to major acts of corruption. Bernal is now running as an independent candidate in Sunday’s election for the mayor of Panama City.
Although the expansion was passed by a large majority, the plan has been a source of much disagreement. Many skeptics are concerned about who the actual beneficiaries of the project will turn out to be. There are still those that vehemently believe that the canal project will be detrimental to Panama’s well-being, such as the National Front for the Defense of Economic and Social Rights (FRENADESO), an organization that represents trade unions, grassroot organizations and civic groups, as well as the Peasant Coordination Against Artificial Ponds/Dams (CCCE) an organization representing the rights of rural peasants. “They claim that if they don’t enlarge the canal, it’ll become obsolete. So what? The canal has been obsolete for small farmers like us since the very start, since we haven’t received any benefits from it,” argues CCCE leader Francisco Hernández. When asked during a television interview whether or not farmers are willing to sacrifice themselves for the will of their country, Hernández responded, “I ask the viewers, how and when has the average citizen felt the benefits of the canal? When someone can answer that, or when a group of average working people tell us, ‘we benefit from the canal,’ then we can talk about the kind of sacrifice farmers would be willing to make.” With the proposed plans to expand the canal not calling for the construction of new dams, it appears that the voice and central concern of the CCCE and their supporters have been heard.
Those resisting the development also fear that the project will exceed the expected $5.2 billion, exacerbate Panama’s environmental degradation, and undoubtedly increase the country’s already steep debt. Skeptics also argue that only the elite will reap major benefits as a result of the surplus from the expansion. They raise a valid argument that those living below the poverty line — approximately 40 percent of the population — will be adversely affected because they suspect that canal growth will not generate a significant number of jobs to compensate the country for its expenses and various disconformities.
Panama Canal Authority’s Expansion Project
After replacing the Panama Canal Commission in 1999, the Panama Canal Authority (ACP) became the autonomous governmental agency responsible for the operation and maintenance of the canal. According to the ACP, without an expansion, the canal would cease being the country’s most viable vehicle of sustainable economic growth. Already having secured loans from such agencies as the European Investment Bank, the Japan Bank for International Cooperation, the Inter-American Development Bank, the International Finance Corporation and the Andean Development Corporation, the ACP contends that the rest of the development venture will have to be funded by increasing the cost of tolls required to traverse the canal and anticipates having to absorb more than $6 billion annually in revenue by 2025.
The ACP reports that the expansion project, slated to be completed at the time of the canal’s centennial in 2014, includes the construction of two new lock facilities. One lock will be located at on the Pacific end, southwest of the Miraflores Locks, while the other will be situated to the East of the Gatun Locks, with each new lock having three chambers and their own water reutilization basin. The project also includes the construction of access channels for the locks, both the widening as well as deepening of existing water channels, and the elevation of Gatun Lake’s water operating level. The expansion project will create a new lane via the construction of a new set of locks which will contain environmentally friendly basins. These troughs will allow for the reutilization of 60 percent of the water used during a transit through the canal and remove the need for the construction of dams that could potentially flood and displace communities making up part of the canal watershed.
Expansion Perceived as an Economic Stimulus
Both the ACP and Panamanian officials assert that the canal project would be an economic stimulus for the country. They also expect that the expansion would help address the growing problem of unemployment in Panama, claiming that the project will create approximately 35,000 to 40,000 jobs as a result of the construction-related activities during the execution of the project. By the year 2025, the ACP projects that between 150,000 and 250,000 jobs will be created. Moreover, they add that the existing locks will continue to operate during the expansion project and that the operational functions of the canal will not be disturbed.
As of early March, the ACP has been in the process of reviewing bids from Consorcio C.A.N.A.L, Consortium Bechtel, Taisei, Mitsubishi Corporation and Consorcio Grupo Unidos por el Canal, three organizations who have submitted their pricing and technical proposals. They will be competing to design and build the new locks of the canal. During this period, the ACP also received proposals for the dredging of the canal’s Atlantic entrance; additional proposals can be submitted until this July 15. “This is an exciting time for the Canal and for Panama as we move forward with the single most important expansion project. We stand committed to hiring a consortium that meets all technical requirements and provides the best value for the project,” said ACP CEO Alberto Alemán Zubieta.
Social and Environmental Concerns
From an environmental perspective, the ACP claims that no communities will be displaced during the project because all expansion activities will occur within the confines of the agency’s operational areas. In addition, both Gatun and Alhajuea Lakes will maintain their exceptionally stable ecosystems. The fact that the Panamanian Environmental Protection Agency (ANAN) has approved the project gives increased credibility to the proposal. Latin News reports that such approval was based on criteria accepting ecological responsibility for the canal’s surrounding areas, taking precautionary measures to prevent risks to animal life, the rescuing and relocation of species, and the implementation of a reforestation plan in the areas impacted by the canal project.
However, critics such as former president, Guillermo Endara, argue that the project creates a sense of false hope, as it promises Panamanians a rise in employment rates that will subsequently create a surge of people coming towards the city in search of jobs that, according to some, simply won’t exist. As a top-level banker explained to the Panama News, on the average, one should expect five applicants for every single job. He also pointed out that both the Panama City metro area and the city of Colon on the Atlantic side of the canal, are not adequately prepared to accommodate the influx of so many people, which in turn, will likely further exacerbate the area’s social problems. According to a Credit Suisse report entitled “Emerging Markets Economics: Panama,” the expansion project does entail some degree of risk. In spite of the fact that the national poverty level in Panama has declined by 28 percent since 2008, the unemployment rate remains staggeringly high. Panama historically has ranked as having the second most unequal income distribution in all of Latin America. Thus, the Credit Suisse report raises a valid concern when observing that the development could potentially send the country into further debt.
In addition, the increase in toll prices faces opposition from the shipping industry, whereby several companies have claimed that they would be motivated to find alternative navigational routes should the expansion be realized. Some shipping companies have already noted that the current economic crisis has severely affected them, so much that they may not be able to remain in business, and a surge in tolls will further intensify their economic woes.
Destiny of the Canal Must be in the Hands of Panama’s Citizenry
According to the Panama News, Egypt’s Suez Canal, which links the Mediterranean Sea with the Red Sea and provides an alternative shipping route, has even lowered its fares, allowing it to more effectively compete with the Panama Canal. Furthermore, as the impact of global warming puts the Arctic Ocean on thin ice, many specialists are beginning to wonder if the Northwest Passage will soon become a navigable shipping route. To boot, it even provides a more direct route from Asia to Europe compared to its Panamanian isthmian counterpart.
There is no doubt that the expansion of the Panama Canal is a massive undertaking, and as such, the transformation and concerns associated with the project will surely remain. Aware that the country’s main economic resource will have a direct impact on Panama’s future and the role it will play in the global economic system, both the ACP and the incoming Panamanian government that will be elected on May 3, would be well advised to tread carefully when dealing with the canal’s future management, as any misstep could bring about dire consequences to the country’s future development and environmental viability. Perhaps more importantly, Panamanian authorities must ensure that the benefits of the revenues achieved from the canal are ultimately fairly allocated to legitimate and accountable social development programs to ensure that all Panamanians benefit, and not just a select, well connected few.
The following is an updated independent research article published in June 2009, which sheds more light on the subject.
The Panama Canal Expansion:
Making It Non-Detrimental to Society

Bert G. Shelton, Research Scientist and Professional Engineer – June 8, 2009
It is said that expanding the canal will benefit everyone. The Panama Canal’s cargo capacity is to be nearly doubled by the planned expansion, which is to add a single new lane for transiting Post-Panamax ships.
Increasing the canal’s capacity has been long desired and seen as good, so it is difficult to argue against its expansion. However, is the chosen single-lane system really the best option and in the best interest of shippers and of society, who will ultimately fund the project?
An independent review of water-saving and operational techniques has identified better lock systems that have been around for more than 100 years, as well as more recent ones that would be far more beneficial and cost-effective.
As an example, an alternative single-lane system arrangement that has locks like those currently planned – but with 4 chambers (instead of 6) and 2 tanks per chamber (instead of 3) – would use 45 (instead of 52) million gallons per transit. Not only would this system have fewer parts and use less water per transit, a dike over geologic faults would be unnecessary and Gatún Lake would be spared from becoming brackish.
However, with any single-lane system, an unexpected problem at any chamber can shut it down.
To avoid shutdowns, a two-lane alternative with 8 chambers – and no tanks – that also uses 45 million gallons per transit could replace the currently planned system. The Panama Canal’s Pedro-Miguel Lock unit is an example of that system’s type of locks. Water use could be further reduced to 30 million gallons per transit by using a recent improvement that adds 2 tanks to each unit of that system.
As with the single-lane alternative, both two-lane systems would avoid the problematic dike presently planned, and Gatún Lake would be protected from salt intrusion.
Either of these two-lane arrangements would make it possible to markedly increase canal cargo capacity, which means more growth in future business.
The planned single-lane lock system presents no similarly obvious advantages. It offers relatively fewer transits for the water used, despite having many more components.
Benefits from the alternatives found during the review, on the other hand, are clear.
The single-lane alternative initially studied – which could transit at least 9, possibly 10, ships a day – has 2/3rds the chambers, fewer than half the tanks, and uses 13% less water per transit than the planned system.
At first glance, the simpler single-lane locks would appear to be more cost-effective than those planned, when considering the transits obtained for the money spent on locks. However, even though more efficient, the lower total capacity of these simpler locks would likely not generate sufficient profit margin to pay for the expansion’s total investment.
Thus, in addition to targeting higher efficiency, the new locks also need to be able to handle more transits.
The two-step two-lane system noted above – which also uses about 13% less water per transit – could easily transit more than the 12 ships a day now planned. Assessment of it confirmed that it would be more cost-effective to build than the planned three-step single-lane system with 6 chamber and 18 tanks.
Because of its two lanes, its chambers can perform the dual function of transiting ships and saving water. Increasing the number of chambers from 6 to 8 implies that this lock system will cost at least 1/3rd more than the planned system. However, that implied increase in cost is significantly reduced by the elimination of 18 tanks.
Additional money is saved by not having to build a very risky dam across geologic faults, as is now required. That not only reduces the cost differential, it also removes risk.
Because each transit uses less water, 14 ships can transit it instead of 12 a day with the same water. That increase in capacity pays for any remaining cost differential.
Furthermore, even more transit capacity can be extracted from it. When heavy rains are more frequent, transits can be increased to about 18 a day. That increase could be made permanent later by adding water storage to the canal.
Alternatively, transits could be increased by at least 50% simply by adding 2 tanks to each of the system’s two-lane lock units. With those tanks added, and when used most effectively, this two-lane system would reduce water-use to 57% of what the planned system will use per transit.
In contrast, there is no way to modify the planned system to reduce its water-use in the future, short of demolishing them and building anew.
Although a two-lane lock system could be designed and built so that tanks could be added in the future, if they were added at the outset they would immediately pay for themselves.
Adding tanks would virtually eliminate the plan to seasonally fluctuate the level of Gatún Lake over a greater range than it is fluctuated today, a change that is needed to increase the supply of water for operating the planned locks.
Eliminating that need would significantly reduce costly dredging.
The 40ft draft depth of the canal’s 35 miles of channel between the Atlantic and Pacific locks must be increased to accommodate 50ft draft ships. However, by not having to drop the lake to the low level the planned system requires, those 35 miles would not have to be deepened an additional 4ft.
Money spent on dredging those 4 extra feet to attain 12 transits a day would be better spent on tanks to attain 18 transits per day – which should also lower the tolls.
Unless eliminated, the plan to increase lake fluctuations will also seasonally force ships that transit the original locks to reduce the cargo they carry by a much larger amount than is the case today, because the bottoms of the original lock chambers cannot be lowered as the lake level drops.
The research shows that the two-lane system would permit canal service and reliability to be significantly improved at a cost about equal to what is currently planned.
By spending the money more effectively, a lower risk and less problematic expansion can be accomplished, offering lower tolls, many more transits, and effectively eliminating the risk of a protracted wait for Post-Panamax ships due to an unexpected lane closure.
None of the alternative systems call for a risky new dike across known faults as the planned new lane requires for traffic to bypass Miraflores Lake. The integrity of that planned dike cannot be guaranteed. Its failure would empty Gatún Lake. That puts the Panama Canal and Panama City at risk. It is a risk that can be totally avoided.
Society, shippers, and operators of Pacific port facilities would be foolish to accept risking an unnecessary dam failure.
Finally, there are additional impacts not accounted for in the present plan that do not arise with the alternative systems.
The planned locks are to operate transiting ships in groups, one direction at a time. Brackish water will be injected into Gatún Lake when ocean-bound ships exit by way of these. This happens today, but only at Gatún Locks. (At the Pacific end of the canal, Miraflores Lake interrupts that salt-injection process.) The excess water in today’s canal system falls just short of flushing all the salt reaching Gatún Lake. Consequently, its salt content has been rising very slowly over the last 100 years.
Relative to today’s Gatún Locks, about triple the volume of brackish water will be injected into Gatún Lake when ships exit each end of the canal through the planned locks. Because the planned locks will use less fresh water per transit – 40% of what a regular lock operation uses – the mix of water in them will contain much more salt than what is injected today via Gatún Locks.
As more lake water is used to move ships and less is spilled along with the salt it carries, Gatún Lake’s salt concentration will – without question – rise at a much faster rate than it is rising today.
Obviously, adding salt to the lake does not negatively affect transits. But the Gatún Lake freshwater resource, which belongs to the nation, will be ruined when its salt concentration rises. That loss – avoidable if higher-yield locks are used – has not been taken into account in the costing of the planned single-lane design.
Neither have losses from the predicted eradication of, or irreparable damage to, sea life along both coasts. Too much salt in the lake will permit coastal creatures to migrate across the Isthmus of Panama, which could lead to disastrous consequences, such as stronger species wiping out weaker ones.
If the cost of these damages to nature were to be properly assessed for the expansion as it is now planned, its price tag would rise far above the most costly of any of the alternative lock options noted here, all of which use existing, tried-and-tested equipment and operations, and which more effectively control salt intrusion.
Yet, the current plan continues. The perception is forming among many that the intent may be to deliberately damage Gatún Lake.
Whether that is the case or not, a brackish Gatún Lake will create a huge market for those who have recently acquired rights to the water of many of Panama’s rivers. Those special interests will profit handsomely from selling their water to the population.
Also – with Panama’s greatest freshwater reserve ruined – other special interests that have long wanted to install industries within the canal will be able to do so, without being blamed for polluting that invaluable global resource.
It is clear that building the planned lock system brings no added benefits to society. The damage it will cause in order to benefit third parties is irreparable and unconscionable. Once poorly performing locks are built they cannot be modified later to improve their performance and reduce their negative effects.
Several more effective lock alternatives to those misleadingly promoted as the best and only for the project exist.
An unbiased revision of the plan – before lock construction begins – is imperative to guarantee a truly sustainable development project that optimizes canal services and maximizes capacity and profits, while preserving a critical freshwater reserve for this and future generations.…...

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