A Primer on the Effect of the Canal Expansion on World Commerce

AAPA Facilities Engineering Seminar

San Diego, California November 7, 2007

Reece F. Shaw, P.E. Vice President Ports and Maritime Group CH2M HILL Areas to be Covered

#1 Historical and Current Canal

#2 Expansion

#3 Impact on World Commerce

2 #1 Historical and Current Canal

3 75,512 sq km - smaller than Republic of Panama South Carolina

4 1606 – 1738: Ferias de Portobelo

199 7711551 115599

Ciudad de Panamá

5 1855: Construction of the Trans-Panama Railroad

John Lloyd Stephens William Aspinwall Henry Chauncey

CaliforniaCalifornia

6 1882 – 1889: French attempt a sea-level canal

• Approximately 22,000 deaths

Ferdinand de Lesseps • About 268,000,000 cubic yards were excavated

7 1904 – 1914: U.S. Construction

• Original canal cost $375,000,000 • 56,307 people worked on the construction of the canal

• 5,609 known deaths Theodore Roosevelt at Pedro Miguel 1906

• 238,845,587 cubic yards of material were excavated

8 Notable U.S. leaders

John F. Wallace, Chief Engineer, 1904-1905

John F. Stevens, Chief Engineer, 1905-1907

George W. Goethals, Chief Engineer, 1907-1914

Dr. William Gorgas, 1904 - 1920

9 John F. Stevens was a preeminent railroad builder

10 Logistics of efficiently moving materials

11 August 15, 1914: First Official Transit - SS Ancon

12 Confluence of technologies

GE powered electric locomotives and gates 13 The Today

Emergence of the class vessel 965-ft LOA; 106-ft Beam; 4,500 TEU 14 Capital Investment

15 The Panama Canal Today

• Average of 36 to 38 vessels pass through the canal each day; 13,000 to 14,000 per year. • The highest toll paid to date: $274,590 by the Maersk Dellys • The lowest toll paid to date: 36 cents by Richard Halliburton who swam the canal in 1928 • 943,042 vessels have used the canal since it opened in 1914 (as of FY2006) • More than 73% of the world’s cargo ships are too large to pass through the current canal • The ACP currently employs about 9,000 people

16 Canal market share N.E. Asia – U.S. East Coast route

17 Areas to be Covered

#1 Historical and Current Canal

#2 Expansion

18 The Panama Canal Expansion

WideningWidening andand DeepeningDeepening ofof AtlanticAtlantic EntranceEntrance

Increasing Level New Atlantic Locks Increasing Level New Atlantic Locks ofof GatunGatun LakeLake andand AccessAccess ChannelChannel

WideningWidening andand DeepeningDeepening NewNew PacificPacific LocksLocks ofof GatunGatun LakeLake andand AccessAccess ChannelChannel

GaillardGaillard CutCut DeepeningDeepening

WideningWidening andand DeepeningDeepening ofof PacificPacific EntranceEntrance

19 Third set of locks

20 Conceptual Design

21 Sustainable Lock Design

PostPost PanamaxPanamax LockLock Lock Cross Section LakeLake OceanOcean ChamberChamber WSB intake Culvert

WSB 3 WSB 2 WSB 1

ChamberChamber Culverts

Width:Width: 180180 feetfeet Length:Length: 1,4001,400 feetfeet Depth:Depth: 60 feet

22 Project Schedule

07 08 09 10 11 12 13 14 15 16 17 18 19 20 25

Designs and contracts

Atlantic and Pacific locks and WSBs construction Start of Operations Access channels, deepening and widening of entrances

Increase in level of and other ancillary works

• Ground breaking ceremony on Sept. 3, 2007 at Paraíso Hill – 30,000 pounds of explosives • Scheduled completion date is Aug. 15, 2014 – Date is 100th anniversary of the canal

23 CH2M HILL’s Role

Program management function includes: • Assist ACP with management of all contracts and procurements • Develop, install and maintain ACP Program Management Information System • Interface with locks design/builder and with all other design and construction activities • Provide ongoing construction oversight, including quality, safety, and operability • Interface with local and international stakeholders • Provide ongoing training and coaching to ACP staff

24 A Wider Path A Broader Future Areas to be Covered

#1 Historical and Current Canal

#2 Expansion

#3 Impact on World Commerce

26 The Effect of the Third Lane on the ACP

• Added Capacity is 12 post-Panamax vessels per day in addition to the current 38 Panamax per day • New locks alone will have a capacity of over 300- million PCUMS tons per year • Added Revenue for 10,000-TEU to 12,000-TEU Post- Panama vessels is estimated at $500,000 per transit

PCUMS = Panama Canal Universal Measurement System

27 In 2005, the maximum sustainable capacity was predicted to be reached between 2009 and 2012

Opening of Third Lane

28 Variation between Real and Forecast PCUMS Tons

Average = 5.1%> Forecast

Capacity will be reached sooner than predicted based on the actual volumes 29 The Third Lane revenue potential

• Revenue projections based on gradual ramp-up over time to 12-transits per day • ACP estimated Canal revenues for first eleven-years with new locks will add $1.15-billion per year * • 1-year revenue at $6-million/day is $2.19-billion

* Source: ACP Master Plan

30 Importance of project schedule

07 08 09 10 11 12 13 14 15 16 17 18 19 20 25

Designs and contracts

Atlantic and Pacific locks and WSBs construction Start of Operations Access channels, deepening and widening of entrances

Increase in level of Gatun Lake and ancillary projects

Capacity versus demand gap

• Capacity versus demand gap = Lost ACP Revenue • Early completion will greatly help ACP and world commerce • Delay will have global economic impacts

31 The Canal's impact on global maritime trade

• The Canal transits around 3% of world maritime trade • Seven of the largest shipping companies in the world have offices in Panama • Sale of bunker fuel to transit ships is the largest in the region • More than 200 cruise ships per year stop in Panama • Over 26 legal offices provide maritime and other international legal services • Canal is transforming Panama from a transportation hub into a center of logistics, commercial and maritime activity

32 EvolutionEvolution ofof thethe worldworld TEUTEU capacitycapacity

1980 1990 1996 5.05% 17.51% 1.34% 26.35% 2.91%

68.60% 97.09% 81.15% .6M TEU 1.6M TEU 2.8M TEU

2006 2011 (includes new orders)

31.32% 37.34% 33.49% 40.50% 3.8M TEUs

28.18% 29.17% OtherOther % % 8.1M TEU TEUTEU PanamaxPanamax %% 12.1M TEU TEUTEU PospanamaxPospanamax % % Asia-Pacific and the U.S. West Coast

• World maritime trade dependency on container shipping is monumental • More than 150 Post-Panamax ships move cargo between Asia-Pacific and the West Coast of the and are transported by train to the East Coast and other regions • Port facilities in the Los Angeles/Long Beach are being stretched to their limits

34 GrowthGrowth ofof containercontainer traffictraffic inin thethe U.S.U.S.

2,557 1,7761,776 2,557 ++ 44.0%44.0%

+ 253.6% • Container imports SEATTLE 15,835 will double by 2020 4,478 1,798 4,396 + 144.5% 4,478 • Rail freight TACOMA NY/NJ 59,420 tonnage will 5,566 increase by 50% 2,043 3,382 1,809 OAKLAND + 207.7% by 2020 + 65.5% Å 353.6% + 65.5% VIRGINIA 13,101 • The majority of 6,165 + 466.8% 9,420 CHARLESTON U.S. ports are not LA/LB 1,437 1,662 1,860 6,639 dredged to accept SAVANNAH + 256.9% the 10,000 TEU HOUSTON + 113.1% 2,152 now under 1,010 2,152 construction MIAMI Legend: Volume 2004 (‘000 TEU)

Volume 2020 (‘000 TEU)

Source: American Society of Civil Engineers (ASCE) – 2005 Report Card for America’s Infrastructure, U.S. DOT Expanded Canal can transit 600 million PCUMS tons annually

36 Principle Logistics Centers

ROTTERDAMROTTERDAM

HAMBURG NY/NJNY/NJ SHANGHAISHANGHAI BUSANBUSAN HAMPTONHAMPTON LA/LBLA/LB RDS.RDS. SAVANNAH SHENZHENSHENZHEN SAVANNAH ALGECIRASALGECIRAS FREEPORTFREEPORT HONG KONG DUBAI HONG KONG KINGSTONKINGSTON DUBAI PANAMÁPANAMÁ SINGAPORESINGAPORE

37 Principle Logistics Centers

ROTTERDAMROTTERDAM

HAMBURG NY/NJNY/NJ HAMBURG SHANGHAISHANGHAI BUSANBUSAN HAMPTONHAMPTON LA/LBLA/LB RDS.RDS. SAVANNAH SHENZHENSHENZHEN SAVANNAH ALGECIRASALGECIRAS FREEPORTFREEPORT HONG KONG DUBAI HONG KONG KINGSTONKINGSTON DUBAI PANAMÁPANAMÁ SINGAPORESINGAPORE

38 World ports connected through the Panama Canal

RotterdamRotterdam BremerhavenBremerhaven TilburyTilbury FelixstoweFelixstowe OsakaOsaka HamburgHamburg Nagoya Dunkerque Nagoya HalifaxHalifax ThamesportThamesport Dunkerque ShanghaiShanghai ZeebruggeZeebrugge KwangyangKwangyang SeattleSeattle NJ/NYNJ/NY BostonBoston QingdaoQingdao WilmingtonWilmington LeLe HavreHavre PusanPusan TokyoTokyo NewportNewport NewsNews AntwerpAntwerp KeelungKeelung ShimizuShimizu OaklandOakland CharlestonCharleston BaltimoreBaltimore PortPort SaidSaid YantianYantian YokohamaYokohama LosLos AngelesAngeles ..MiamiMiami SavannahSavannah HongHong KongKong KobeKobe LongLong BeachBeach NewNew OrleansOrleans EvergladesEverglades MarseillesMarseilles ColomboColombo ColonColon ManzanilloManzanillo (Mx) (Mx) VeracruzVeracruzKingstonKingston ChabangChabang HakataHakata ManzanilloManzanillo LaLa SpeziaSpezia KaohsiungKaohsiung CartagenaCartagena PuertoPuerto Limón MaracaiboMaracaibo BalboaBalboa LaLa GuairaGuaira TanjungTanjung Priok Priok GuantaGuanta BuenaventuraBuenaventura PuertoPuerto CabelloCabello DoniamboDoniambo MantaManta SingaporeSingapore GuayaquilGuayaquil CallaoCallao SantosSantos TahitiTahiti AricaArica IquiqueIquique ParanaguaParanagua BrisbaneBrisbane CoquimboCoquimbo ItajaiItajai SydneySydney AntofagastaAntofagasta ValparaísoValparaíso SanSan AntonioAntonio AucklandAuckland SanSan VicenteVicente Canal transits MelbourneMelbourne Feeder services which do

Source:Source: ACPACP yy ComPairData,ComPairData, 20062006 not transit the canal World ports connected by liner services that transit the Canal or use Panamanian ports

AlgecirasAlgeciras FelixstoweFelixstowe MiamiMiami FLFL Altamira,Altamira, MEXMEX Freeport,Freeport, BahamasBahamas MobileMobile ALAL SalernoSalerno San Antonio AntofagastaAntofagasta GenoaGenoa MumbaiMumbai (Nhava(Nhava Sheva) Sheva) San Antonio Antwerp GuayaquilGuayaquil MundraMundra SantoSanto TomasTomas dede Antwerp San Juan PR Arica HaifaHaifa NagoyaNagoya San Juan PR Arica Napier SanSan VicenteVicente AucklandAuckland Halifax,Halifax, NovaNova ScotiaScotia Napier HamburgHamburg NaplesNaples SavannahSavannah GAGA BalboaBalboa New York NY/NJ ShanghaiShanghai Baltimore MD HavanaHavana New York NY/NJ Baltimore MD Hong Kong NingboNingbo ShekouShekou Hong Kong Barcelona HoustonHouston TXTX NorfolkNorfolk VAVA ShimizuShimizu BarranquillaBarranquilla IquiqueIquique NoumeaNoumea SouthamptonSouthampton BilbaoBilbao JacksonvilleJacksonville FLFL OaklandOakland CACA SydneySydney BostonBoston MAMA KaohsiungKaohsiung OaklandOakland CACA TampaTampa FLFL BremerhavenBremerhaven KeelungKeelung OsakaOsaka TaurangaTauranga BrisbaneBrisbane KingstonKingston PaitaPaita ThamesportThamesport BuenaventuraBuenaventura KobeKobe Papeete,Papeete, TahitiTahiti TilburyTilbury BusanBusan KwangyangKwangyang PhiladelphiaPhiladelphia PAPA TimaruTimaru Callao LaLa GuairaGuaira PortPort ChalmersChalmers TokyoTokyo Callao Tuticorin, India Cartagena, LazaroLazaro Cardenas Cardenas PortPort EvergladesEverglades FLFL Tuticorin, India Cartagena, ValenciaValencia Caucedo,Caucedo, DomDom RepRep LeLe HavreHavre PortPort KelangKelang Port of , ValparaisoValparaiso CharlestonCharleston SCSC LeghornLeghorn Port of Spain, LongLong BeachBeach CACA PortPort Said,Said, EgyptEgypt Vancouver,Vancouver, B.C.B.C. ChiwanChiwan Port-au-Prince Veracruz,Veracruz, MEXMEX Colombo LosLos AngelesAngeles CACA Port-au-Prince Colombo Manzanillo, Dom Rep PortlandPortland OROR VigoVigo Cristobal, Panama Manzanillo, Dom Rep Cristobal, Panama Manzanillo,Manzanillo, MEXMEX PuertoPuerto CabelloCabello WilmingtonWilmington NCNC CuracaoCuracao Manzanillo,Manzanillo, PanamaPanama PuertoPuerto LimonLimon XiamenXiamen Damietta,Damietta, EgyptEgypt MaracaiboMaracaibo PuertoPuerto QuetzalQuetzal Xingang/TianjinXingang/Tianjin Dubai,Dubai, JebelJebel AliAli MataraniMatarani QingdaoQingdao YantianYantian DunkirkDunkirk MejillonesMejillones RioRio HainaHaina YokohamaYokohama Ensenada,Ensenada, MEXMEX MelbourneMelbourne RotterdamRotterdam ZeebruggeZeebrugge Thank you

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