Papua New Guinea’s jet fuel saga shows monopoly’s grip on economy

Nationwide flight cancellations in Papua New Guinea and an increase in port charges at the start of 2023 have highlighted the chronic problems for the Pacific country that involve monopoly control of many parts of the economy.

Domestic travelers on national airline Air Niugini suffered repeated cancellations over the festive season after oil company Puma Energy withheld jet fuel supplies, citing difficulties in getting foreign currency in Papua New Guinea. 

The latest halt to domestic flights, on Thursday, prompted Prime Minister James Marape to fly to Singapore on the weekend for talks with Puma Energy executives.  

“We cannot be held to ransom like this,” Marape said in a statement.

Papua New Guinea is the most populous country in the South Pacific but among the poorest as high crime rates, corruption, inadequate infrastructure and lack of competition increase the cost of doing business and deter investment. 

Puma Energy, owned by Swiss commodity trading company Trafigura, operates Papua New Guinea’s only oil refinery and also has a monopoly on supply of imported fuels. Competition is also limited in other crucial industries such as banking, ports and telecommunications.

Puma’s frequent foreign exchange difficulties stem from a long-running legal dispute with Papua New Guinea’s central bank. It says the energy company has not fulfilled obligations under its refinery agreement, which include keeping its Papua New Guinea export earnings in the country, and on occasion has cut off Puma’s access to foreign exchange.

After his meeting with Puma executives, Marape said businesses shouldn’t face difficulties in getting the foreign currency they need to pay for imports. 

But he also indicated that more of the country’s oil production should be refined into fuels for domestic use, rather than shipped abroad.

He said he would have meetings with international oil companies “to look at producing petroleum products from our own resources instead of importing as we go into the future.”

“The whole idea is to ensure that we are energy-secure, instead of being wholly-dependent on one supplier, to save the country from grinding to a halt as we’ve seen last Thursday,” Marape said.

An increase to port charges, announced in the first week of January, has also caused concern for businesses.

South Pacific International Container Terminal Ltd. said the increase to charges at international wharves in the capital Port Moresby and the industrial hub of Lae is necessary because costs have risen steeply. 

The company secured a 25-year contract in 2018 to provide stevedoring services at the two ports.

Wilson Thompson, president of the Highlands Farmers & Settlers Association, said the higher cargo handling charges would likely be a double burden for farmers and consumers.

Papua New Guinea largely exports raw agricultural and mineral commodities rather than processing them domestically to increase their value or to create products for domestic consumption.

“We import fertilizers, weedicides and fungicides and farm implements and stock feed and pay at the wharf and then export again and pay at the wharf and then pay again for imported coffee and Milo and chocolate and cooking oil and the whole lot,” he said.