Installation of hydroelectric stations enabled Panama to reduce its dependence on imported oil for energy from 40% of total imports in 1975 to 15% of total imports in 1991. However, as of 2002 the country still imported more than 70% of its energy. Panama had a total installed electric capacity of 1,350,000 kW in 2001. Production of electric power in 2000 totaled 4.6 billion kWh, of which 29.5% was from fossil fuels, 69.1% from hydropower, and 1.4% from other renewable sources. Consumption of electricity in 2000 was 4.7 billion kWh. In 1998, IRHE, the state-owned electricity company, was broken up into four generating and three distribution companies and sold. A geothermal region in southwest Panama has an estimated potential of 400,000 kW. Some energy is also obtained from fuel wood and biomass residues. In 2000 the Inter-American Development Bank (IDB) agreed on a loan of $59.8 million for construction of a $92 million 96 MW thermal generating plant near Panama City, the first such loan made to Panama.
After years of unsuccessful exploration, two oil strikes—one off the San Blas Islands, the other a 500-million-barrel find about 100 km (62 mi) east of Panama City—were announced in 1980. Several companies hold concessions in the Gulf of Panama, but there was no commercial production in the mid-1980s. The inauguration in 1982 of the Trans-Panama pipeline, operated by Petroterminal de Panamá, facilitated the shipment of Alaskan crude oil to the eastern United States by allowing the loading and unloading of supertankers on both sides of the isthmus; the pipeline's maximum capacity was 860,000 barrels per day. The pipeline's contribution to gross domestic product (GDP) fell from6.9% in 1987 to 3.4% in 1990 and to 2.5% in 1991, reflecting reduced demand for Alaskan oil on the US east coast. The pipeline was closed in April 1996, reflecting this decline.
In 1992–93, new legislation created Petroleum Free Zones (PFZs) to take advantage of Panama's location as a transshipment location for crude oil and petroleum products. The PFZs allow crude oil to be imported tax-free and then stored, pumped, transferred, distributed, sold, and refined for subsequent export. In 2001, 613,000 barrels per day of petroleum were shipped through the canal, accounting for about 16% of all shipments through the canal.