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Panama Canal: Expansion into the 21st Century

After over a decade of planning and building, the Panama Canal has expanded its capacity thanks to the additional set of locks, large enough to accommodate modern cargo ships.

The 50-mile long, three-step lock waterway connecting the Atlantic and Pacific Oceans across the Isthmus of Panama.

Panama Canal View 2016

The Panama Canal Expansion view (2016)

Adapting to Modern Maritime Trade


This $5.2 billion canal expansion project
added a third set of locks to the 102-year-old canal, allowing it to accommodate the huge new container ships that now dominate world maritime trade but were too large to fit through the canal’s original locks. The new locks can accommodate New Panamax vessels, which can transport up to 12,000 containers stacked as tall as a 15-story building.

The Panama Canal Authority (ACP) originally put out a request for traditional program management oversight. Instead, we proposed a much broader strategic advisory partnership and it was in this capacity that we were selected to facilitate the project.

New Panamax Vessels

Deciding What the Expansion Should Look Like


We advised the ACP on the development of the framework for defining, planning and executing the expansion project. Our team served as program advisory consultants, providing guidance to the Authority as we outlined the scope of the project, determined the methods for financing and constructing it, and developed an approach to managing it.

As the program advisors, we worked alongside the ACP to decide what the final project was going to look like. We reviewed over a hundred studies and reports about what currently existed and what was possible, in order to build a plan that took all opportunities and restrictions into account.



Panama Canal in 1915 with the 1st ship through the original locks (left) and the new expansion in 2016 (right)

A Plan the Local Community Can Support


Before the expansion could start, the plan had to be approved by a referendum of the Panamanian people. It also had to win support from the international shipping and financial communities. WSP | Parsons Brinckerhoff engaged our global resources and called upon over 40 professionals across various operating divisions in order to make sure that the plan we delivered was innovative, comprehensive, and holistic.

We developed and integrated five models – capability, operation costs, market demand, hydrologic and financial – to determine how to maximize the economic value of the Canal. This was used to design an implementation strategy and ultimately to prepare and strategize the bid process.


The Panama Canal Map, showing where the new locks were added.

A Forecast for the Future of the Canal


We also built a 27-year demand forecast, accompanied by a working model, for the operation of Panama Canal. This model was used during the financing stage of the expansion project. It allows a user to select customized model output criteria, change key assumptions, test various sensitivities, and instantly view the results of customized scenarios.

Despite the fact that this model was designed to be evergreen, meaning that it allows for all critical inputs to be updated, there was a significant upheaval because of the Global Financial Crisis in 2008/2009 and the ACP wanted to confirm that the model still accurately represented all market trends. We therefore performed a calibration of the demand model to ensure continued accuracy.

The Panama Canal handles as much as 5% of global trade. The expansion will thus guarantee its continued prominence into the 21st century.

Status

  Completed June 2016
     

Increase in Canal Capacity

  100%
     

Share of Water Reused

  60%
     

Client

  The Panama Canal Authority (ACP)
     

Our Services

  Program Advisory Services, Project Development,
Financial Planning, Economic Modeling & Forecasting
     

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