Panama Canal says consortium agrees to restart work Thursday

PANAMA CITY (Reuters) - Work on the multibillion dollar Panama Canal expansion project, which ground to a halt amid a cost row, will restart on Thursday, the administrator of the major world waterway said on Wednesday.

A Spanish-led construction consortium and the Panama Canal Authority have also given themselves 72 hours to agree on other key issues the sides have been divided over, the statement said.

The dispute between the two parties over $1.6 billion in cost overruns and how to maintain financing halted work on the project for two weeks and has delayed its projected completion until at least December 2015.

Delays could cost Panama millions of dollars in lost shipping tolls and are a setback for companies worldwide that are eager to move larger ships through the canal, including liquefied natural gas (LNG) producers that want to ship from the U.S. Gulf Coast to Asian markets.

The Panama Canal Authority said that when the work restarts it will pay the consortium, led by Spanish builder Sacyr, $36.8 million to cover work done in December.

The agreement was reached in phone calls between top executives from the consortium companies and Panama Canal Authority officials, the statement said, adding, "There are still some issues on which an agreement has not been reached."

Earlier on Wednesday sources told Reuters that a Spanish government working group would consider changing the status of a state-backed guarantee given to Sacyr for the original work.

The overall expansion project, of which the consortium is building the lion's share, was originally expected to cost about $5.25 billion, but the overruns could increase that to nearly $7 billion.

(Writing by Elinor Comlay; Editing by Simon Gardner and Lisa Shumaker)