National Energy Secretariat (Panama)

Secretaría Nacional de Energía

Country

Location

Regulated area

Panama

Panama City

Energy & natural resources

Useful pages on the regulator website

Key individuals

Jorge Rivera: Staff Secretary of Energy

Regulatory oversight

The National Energy Secretariat (NSE) is the government body responsible for implementing energy policies in the Republic of Panama. It was restructured by means of Law 43 of 5 April 2011 (the NSE Law). The NSE Law regulates the energy sector, which includes exploration, exploitation, production, generation, transmission, transport, storage, refining, import, export, commercialisation and any activity relating to the industry of hydrocarbons, oil and its derivatives, natural gas, biofuel, hydraulic energy, geothermal, solar, biomass, wind, nuclear and other energy sources. The NSE is attached to the Executive Branch, through the Ministry of the Presidency. Its focus is planning and designing energy sector policies; promotion and analysis of the energy sector, conducting research and promoting technological development.

Reporting and disclosure obligations

The NSE is empowered to request information relating to any aspect of the energy sector from public employees, government authorities, state and municipal institutions, and public and private companies.

The NSE grants geological, geochemical and geophysical exploration permits for the exploration of areas with hydrocarbon potential. The applicant, if granted the authorisation, is responsible for its own costs and expenses and must provide all information and reports resulting from any finding within 90 days of the termination of the work. Holders of an exploration permit have the first option for a contract for the exploration and exploitation of hydrocarbons. In awarding the exploration and exploitation contracts, the NSE may elect to open a tender process or allocate the contract directly to the permit holder. Contractors are required to notify the NSE of any subcontracts, arrangements or underlying agreements they enter into to carry out their operations.

Monetary sanctions and recent behaviour

The NSE’s monetary sanctioning regime contemplates fines for non-compliance with the NSE Law or breach of any contract between an entity and the NSE. Fines range from US$1,000 to US$250,000.

Non-monetary sanctioning powers and behaviour

Aside from monetary fines, the NSE may terminate operating contracts when the contractor:

  • does not initiate explorations within the period established by the regulation, or interrupts the work for more than 60 consecutive days;
  • has not started work within the first year of the exploitation period, except for force majeure or fortuitous events;
  • has built the facilities required for exploitation and does not begin work or the level of production declines substantially from the previously agreed programme;
  • assigns totally or partially the contract without prior approval from the NSE; or
  • violates any of the obligations established in the NSE Law or the operations contract.

The contractor has 90 days from the notification of breach of any of the above-mentioned conditions to remedy the breach or the contract will be terminated and the NSE will execute the performance bond.

Recent and upcoming developments

Empresa de Transmisión Eléctrica (ETESA), a government-owned corporation in charge of coordinating the dispatch of power plants and of the interconnection system in Panama, closed the public consultation process for a national expansion plan for the interconnection system for the years 2019‒2033 on 3 February 2020. The process allows interested parties to review the current plan as designed by ETESA and provide comments to help improve the government’s analysis on the matter. The 2019‒2033 plan aims to address the energy requirements and planning required for the next 14 years.

Challenges

Panama currently has enough generating power capacity to meet its energy demands. Challenges for the future include improving the interconnection with Central America and the ability of the regulator to adequately determine future energy needs. Currently, two licences have been granted for the construction and operation of two liquid natural gas plants to produce more than 1,000MW of contracted energy. The construction of these plants has experienced delays and legal challenges. The regulator cannot award future power purchase agreements since it has already contracted the energy production and purchase to cover future needs. However, further delays and uncertainty on the construction and initiation of operations of these plants will limit the ability of the regulator to adequately contract the required energy to meet future demands.

Interacting with the regulator

The NSE is a professionalised regulator that oversees licensing for the following services in the Republic of Panama: exploration, exploitation and operation of hydrocarbons, oil and its derivatives, natural gas, biofuel, hydraulic energy, geothermal, solar, biomass, wind, nuclear and other energy sources services. Most communications with the regulator are typically handled by energy providers. Formal communications must be in writing and in Spanish.

Notes for foreign investors

There are no restrictions on foreign investment in the power energy and hydrocarbon sectors. Foreign investors can participate through the acquisition of state-owned generating companies, or by bidding for concessions or licences. The acquisition of state-owned companies of the power energy sector must be executed through a public tender process in accordance with the provisions in energy law.

Other regulators it works closely with

Autoridad Nacional de los Servicios Públicos
ASEP
National Authority of Public Services
In charge of granting, overseeing and approving licences and concessions for power generation and distribution.

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