PANAMA CITY, Panama – Sometimes the real estate maxim "location, location, location" says more about politics than geography.

Panama wants to be one of the energy hubs of the Americas. Occidental Petroleum of California, Qatar Petroleum of the Middle East, and some European and South American investors are pondering whether to build refineries here – not just because Panama gives easy access to both the Pacific and Atlantic oceans, but also because this country is saying yes to refineries at a time when the United States is saying no.

Gasoline prices have ricocheted up and down this summer largely because refineries haven't kept up with demand. Lingering maintenance issues, compounded by Hurricane Katrina damage, have caused several shutdowns in the U.S. this summer. "We import millions of gallons of gasoline every day, and that consumption, along with demand from other parts of the world, has led to a shortage of refining capacity."

One of the causes of the U.S. refinery shortage is the penchant for what some call BANANEM, for Build Absolutely Nothing Anywhere Near Me.

Enter California's Oxy and the Qatari government's national oil company. They are studying whether to build a 350,000-barrel-per-day refinery on an old Chiquita banana plantation in Panama's Pacific southwest.

"Refining capacity is constricted in the United States," said Dan Kornfield, a Latin American specialist at the Austin consulting firm Stratfor. "If Panama could secure a steady oil source from nearby, a refinery there could be profitable."

But even Panama's welcome mat could trip up an investor. Expansion of the Panama Canal and a boom in high-rise condos means construction work for thousands of Panamanians, but the 10,000 workers needed for a refinery are a special breed.

It's sophisticated work with pressure vessels, miles of pipelines that carry large volumes of distilled petroleum products at high temperatures, and dense ganglia of electrical and computer systems. The people who do this work are in great demand around the world, and the cost has risen by two-thirds in the last 30 months.

Oxy and Qatar Petroleum said in May that the Panama refinery might cost $7 billion. They now are doing a feasibility study that one U.S. diplomat in Panama City said is looking at far higher cost estimates – high enough to keep the project from going ahead.

Meanwhile, Panama's legal system presents additional challenges. Under Panamanian law, anyone who feels injured by a construction project owned by foreign investors can seek a "sequestration" order from a judge, which requires the investors to post a bond equal to the claimed damages or shut down the project.

In February, the trans-Panama pipeline, known as Petroterminales de Panama, or PTP, spilled about 5,000 barrels of crude near the Pacific. A lawyer for an indigenous tribe claimed the spill would create 50 years of harm worth $500 million, and he got a judge to issue a sequestration order against the pipeline.

The order tied up the pipeline, which was built to transport Alaskan crude oil to refineries on Panama's Atlantic coast, until July, when a Panamanian Supreme Court justice threw it out.

Still, it was a lesson for foreign investors that cooled enthusiasm for Panama's energy hub ambitions.

The U.S.-Panama free-trade agreement negotiated by the Bush administration calls for international arbitration in these cases. American investors say that would do much to strengthen the rule of law in Panama, where judicial corruption is considered a major problem.

"The way it is now, if you have to go to court, it's game over," said Paul McBride, a leader in the U.S.-Panama Chamber of Commerce and chief executive of the Prima Panama development company, which develops retirement communities.

Panama's Congress has ratified the free-trade pact, but the U.S. Congress has yet to act – in part because of objections from American labor unions.

Approval here, however, could not only affect future petroleum investments in Panama, but also future U.S. gasoline prices as well.