Petroleum Free Zone

petroleum free zone

The Petroleum Free Zone concept is inherent to Panama ‘s historical condition as an international commercial, maritime and trade center due to its strategic geographical position. The free zone is mainly an area within which all transactions are tax free.

LNG is the new product in Panama, partially because of the expansion of the Panama Canal in 2016.

In LNG, the panorama today is:

      1. AES is already operating a 600MW gas powered plant and an LNG tank farm
      2. Vopak is operating Chevron´s terminal
      3. Chinese project Martano LNG terminal has been stopped.
      4. But there are others in planning.

Cabinet Decree No. 25 of September 29, 2008, and further amendments, was enacted to fulfill those industry changes, develop the ground rules for a national Petroleum policy and drive the development of the Petroleum free zones into the next stage. Law 52 of 2008 and Law 43 of 2011 were enacted as well with the main purpose of reorganization of all topics related to energy including the Hydrocarbons among others.

Within any Petroleum Free Zone, individuals or corporations, national or foreign, may perform multiple operations under a special tax regime, as follows:

    • Introduce, storage, refine, transform, manufacture, mix, purify, bottle, market, transport, transfer, pump, sell for the domestic market, export, reexport, and, in general, manage and supply crude oil, semi processed or any of its by-products; Petroleum Free Zone Users Type B are only permitted to introduce, storage, dry, mix, export and reexport crude petroleum, semi processed or any of its by-products in or from a Petroleum Free Zone.
    • Build, install and operate petroleum refineries and other transformation or processing means of crude oil or semi-processed, storage tanks, oil pipelines, gas pipelines and poly-pipelines, pumping installations and pipes, buildings for offices, warehouses, or workshops and any other installations; introduce machinery, equipment, spare parts, containers, bottles, vehicles, furniture, equipment for fire or spill prevention, construct buildings for offices, warehouses, workshops for the use of the beneficiaries of the contracts to operate in the Petroleum Free Zones in any of the activities mentioned in subsection (a) hereinbefore;
    • Lease, acquire or in any other manner use lands, easements, right of way and other real or personal rights in regard to bona mobilia located in the areas designated as Petroleum Free Zones;
    • Establish water services, electrical power, gas, energy, heat, refrigeration or any other kind of services, upon previous coordination and approval with the respective public entities;
    • Build ports, piers, dry docks, shipping and unloading places for ship and airplanes, railroad stations for loading and unloading on land or granting contracts for the construction and exploitation of such works; and
    • In general, all kinds of operations or activities proper or incidental to the establishment and operation of the Petroleum Free Zones for the introduction, storage, pumping, transference, distribution, marketing and/or crude refining and petroleum by products.

Panama has the potential to become a major oil and downstream products redistribution center for two main reasons: one is the existence of the Panama Canal creating a natural bunkering and marine fuels market as well as a transshipment point, and the other is the fact of being the narrowest isthmus between the Atlantic and Pacific oceans to pipeline oil from South America to the Far East. Companies already doing business in 10 petroleum free zones include Exxon/Mobil, AES, BP, Chevron/Texaco, Gencor and others.

If you want to set up a Bunkering or LNG Operation in Panama, we have licensed real estate agents, investment advisors and we work closely with Pardini & Asociados, a law firm with 40 years of experience for all legal matters to assist you on all your business needs.

The BusinessPanama Group provides a convenient One Stop Shop offering the services of

    • Setting up the company or branch
    • Locating office and living premises in Panama City for the company and its executives
    • Setting up all operations, contracts, permits, etc.
    • Accessing special tax incentives
    • Applying for visas, work and residence permits
    • Relocation services
    • Others

For more information, please contact us.

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