Petroleum companies working with Government to find solution to fuel crisis

by PNG Business News - February 22, 2023

Photo: An empty service station at 8-Mile in Port Moresby after the fuel bowsers ran dry.

The Government is now in serious discussions with Kumul Petroleum Holdings Ltd (KPHL) and three multi-national petroleum companies to find solutions for the fuel shortage in the country, with a major announcement expected soon, Prime Minister Hon. James Marape has said.

The Prime Minister said the Government has been holding talks with ExxonMobil, Total Energies and Santos, together with Mineral Resources Development Company (MRDC) and State-owned company KPHL, to look into the immediate import of fuel and a long-term solution in the construction of a locally-based refinery for downstream processing to secure the domestic market.

Prime Minister Marape said today (February 19, 2023) Papua New Guinea, under his Government, was heading in the direction of downstream processing of its resources but Puma Energy’s actions of recent months have forced the Government to act now rather than later in this area.

“Our fuel insecurity due to reliance on one or two suppliers is forcing the Government to urgently call on its State-owned Enterprises and major oil companies operating in the country to finding solutions,” said PM Marape.

“The Government is now collaborating with Kumul Petroleum, MRDC, ExxonMobil, Total Energies and Santos to explore solutions that can ensure the country’s fuel security, including aviation fuel and general fuel.

“We are leaving no stone unturned. What has happened under Puma must not be repeated. For far too long, this country has been victimised when, in fact, Papua New Guinea continues to export petroleum and gas to the world year after year. The irony is staggering.

“I am, therefore, pleased to note the progress the Government is making with our national development partners – ExxonMobil, Total Energies and Santos.

“I am also looking forward to the moment when we can make the announcement on the immediate solutions we have worked out to resolve this relatively long-standing issue.”

Papua New Guinea was plunged into an acute shortage of fuel at the end of last year 2022 when Puma Energy PNG Ltd announced it could no longer source crude oil and finished products because of unresolved foreign currency issues. This affected its supply of fuel to PNG, especially to the aviation industry where Air Niugini was forced to ground its flights and left the travelling public stranded for days as a result. The matter raised huge concerns on supply monopoly and the country’s fuel security both for short and long term.

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International Trade Minister Richard Maru Urges Swift Resolution to Fuel Shortage

Photo: Richard Maru International Trade and Investment Minister Richard Maru has expressed his concern about the ongoing fuel shortage in Papua New Guinea, stating that it could send the wrong signal to investors willing to do business in the country. Maru emphasized the need to resolve the issue quickly, saying, "This will leave a bad impression on our investors. It cannot be an ongoing situation where we hold up business activities and service suppliers. My concern is the investors. It is beginning to create a pattern and we must not allow it (to continue)." Maru also urged Puma Energy and the Bank of Papua New Guinea (BPNG) to find a solution to the constraints in the supply of foreign exchange (FX) that prevented Puma Energy from purchasing crude oil. He said, "I'm sure Puma Energy and the Bank of PNG understand that and will come up with a resolution that will benefit everyone." Puma Energy's country manager, Hulala Tokome, confirmed that the company had not received FX flows for over six weeks, which was the reason behind the fuel shortage. he said, "Puma Energy could not purchase crude oil due to the constraints in the supply of foreign exchange (FX)." BPNG has maintained its stance that Puma Energy should be dealing only with commercial banks. The fuel shortage has affected motorists and fuel service stations in Port Moresby, Lae, and Mt Hagen. Maru emphasized that the fuel shortage would mostly affect businesses, saying, "It is important that the issue be resolved quickly. This will leave a bad impression on our investors. My concern is the investors. It cannot be an ongoing situation where we hold up business activities and service suppliers." In conclusion, Maru called on Puma Energy and BPNG to find a resolution that would benefit everyone and ensure that such fuel shortages do not happen again in the future. He said, "We must not allow it (the fuel shortage) to continue."


PNG Business News - February 28, 2023


Photo credit: Puma Energy Amid current economic issues in Papua New Guinea such as high inflation and unemployment, a shortage of foreign exchange currency last week crippled the country's fuel supply immensely, marking the second major nationwide fuel crisis within three months. This was the result of an ongoing situation between the Bank of Papua New Guinea (BPNG) and the country's major fuel products supplier, Puma Energy, due to a lack of diligence in discussions by both parties concerning the approval of the fuel firm's foreign exchange orders by the country's financial regulator. By 17th February, the nationwide shortage in fuel prompted business houses and the public to be held to ransom and left to squander what was left of Puma Energy's limited supply. Puma Energy confirmed in a letter to the media that none of its propositions have been satisfied from agreements discussed with Prime Minister James Marape during his meet with company executives in Singapore. Puma's Country General Manager, Hulala Tokome, revealed that what was discussed and agreed upon in Singapore with the government had not been honoured. "Our FX orders have been restricted by the Bank of PNG, which is limiting our ability to operate and ensure the supply of product into the country. The root cause of the problem is for the Bank of PNG to approve our FX orders. If our FX orders are not settled this will impact the availability of fuel supply," he said. "A total shutdown by Puma is going to affect a lot of businesses nationwide, because it takes us more than a month to replenish our fuel stock," Mr Tokome said. Propositions by the government in ensuring an immediate solution since the last fuel shortage have not come to fruition, and it has shown no tangible outcomes in affirming a confirmed alternative. This has prompted major service providers to ration their fuel intake, leading to flight disruptions, constant power blackouts, cuts in water supply, and a huge delay in business activities and operations due to the limit suppliers have put on fuel consumption. State entities have also voiced their concerns with Commissioner of the Independent Consumer and Competition Commission (ICCC), Paulus Ain, stating that the impact of fuel disruptions in PNG is of "grave concern" and that the ICCC is encouraging fuel suppliers to enter into the PNG market. "There is no restriction for other suppliers to enter into the fuel supply market," Mr. Ain said. Government departments and agencies responsible for facilitating potential entrants should not become a barrier but assist and facilitate possible and potential entrants," he said. In addition, Institute of National Affairs (INA) executive director Paul Barker also said there needs to be honest and transparent negotiations between Puma Energy and Bank of PNG.  Barker said all major forex transactions for each month should be made available and posted online to the market and public, so that ongoing disputes and claims can be openly verified. In relation to the ongoing fuel saga, discussions by the government with Kumul Petroleum Holdings Ltd. (KPHL) and multinational companies ExxonMobil, Total Energy, Santos, and the Mineral Resources Authority (MRA) are still pending. The Prime Minister recently stated that the government will be heading towards locally based downstream processing, but Puma's current stance has questioned the government's timing on when a local refinery is scheduled to come into play. While the government has made its appeal to suppliers of fuel there are also underlying issues affecting the flow of foreign currency to the domestic foreign exchange market. The fall in forex together with issues concerning PNG's major economic sectors are contributing to high inflation, unemployment, and the ongoing threat in fuel supply.

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