Panama Canal expansion 'will continue', consortium says

Construction has slowed significantly on the three-lock expansion work

A Spanish-led consortium has backed down on its threat to halt work on expanding the Panama Canal.

A stoppage "is not a scenario being considered at this moment", it said in a statement issued late on Sunday.

But it remained an option unless a row with the Panama authorities was resolved, the group added.

The consortium had said it would suspend work on Monday unless the Panama Canal Authority (ACP) paid $1.6bn (£1bn) in added costs.

The ACP - the government agency that runs the waterway - said informal negotiations had been held over the weekend with Spain's Sacyr Vallehermoso, the leader of the consortium, but did not say if an agreement was any closer.

The consortium is expected to hold talks with the ACP and insurers Zurich North America on Tuesday to discuss the status of the $3.12bn project.

Third-party talks

The ACP has said it is in talks with other third-party contractors to complete the expansion work in case an agreement cannot be reached with the Grupo Unidos por el Canal (GUPC).

On 30 December, Sacyr Vallehermoso gave Panama 21 days to make the payment.

It blames the over-run costs on faulty terrain studies conducted by the ACP.

The ACP has denied the accusation but has said it will pay if found to be at fault after arbitration, the Financial Times reports.

The GUPC, which also includes Impregilo of Italy, Belgian firm Jan De Nul and Constructora Urbana from Panama, won the contract to build a third set of locks in 2009.

The expansion will allow wider vessels to transit, and is seen as key to the US in terms of increasing shipments of liquefied natural gas to Asia more quickly and cheaply.

The project is due to be completed in mid-2015, although construction has slowed significantly.

The Panama Canal, which took 10 years to build and opened in 1914, carries 5% of world trade.