Fuel buyers in Papua New Guinea have been warned to expect higher prices as the government negotiates with global suppliers to end shortages in the local market related to the winding back of Puma Energy’s operations in the country. Meanwhile, short-term solutions are being put in place.

Puma Energy’s Napa Napa refinery

Papua New Guinean consumers have been warned that they will have to bear an additional charge on fuel, as the government seeks a permanent solution to fuel chronic fuel supply shortages.

These shortages have followed the recent announcement by PNG’s largest fuel importer, Puma Energy, that “no further supplies of fuel will be available for sale in Papua New Guinea until further notice” due to a “supply shortage”.

Puma says it is “continuing to protect jet supply to meet demand for emergency services, including medical operators and the police in Port Moresby”.

Emergency measures

PNG’s government is negotiating with alternative suppliers to divert cargoes that were destined for other countries as a short-term measure to keep the market supplied.

“That will cost us, and we need to inform our consumers in advance,” says Paulus Ain, head of the Independent Consumer and Competition Commission. The ICCC is in the process of finalising the additional charge, which will be announced on 8 March, he says.

The shortages have led to queues at petrol stations and forced airlines to scrap or delay flights.

“The fuel issue is a challenge for now, but we are managing”

National airline Air Niugini has been able to maintain its international flights but, with the supply of aviation fuel locally running low, it has taken the unprecedented step of purchasing fuel directly to support its domestic schedule. This fuel is already in Port Moresby, according to a statement from the airline made yesterday.

“However, there is presently no regional centre jet fuel delivery solution in place. In the event of any disruptions to the Air Niugini schedule due to the lack of regional jet fuel supply, announcements will be made to keep passengers informed,” the statement said.

Meanwhile, PNG Air has announced a cancellation of all of its domestic services, but is running some charter flights with jet fuel supplied by Pacific Energy Aviation.

Prime Minister James Marape has said the government will invoke PNG’s Essential Services Act to help address the crisis, and is negotiating with suppliers including ExxonMobil and TotalEnergies on a longer-term solution.

Supply pledge

Mobil Oil New Guinea, an affiliate of ExxonMobil, has already redirected some supplies of gasoline and diesel to Port Moresby, Lae, Madang and Rabaul, and said in a statement that “additional vessels are also already enroute to Papua New Guinea and will be arriving throughout the coming days and weeks”.

ExxonMobil last week said it remains committed to PNG and is “actively collaborating with the PNG Government to increase our imports of fuel products into the country.”

Police Commissioner David Manning urged companies and the public to be patient during periods of fuel rationing. He said the police have plans in place to enforce regulations for the allocation of fuel supplies, and will investigate alleged breaches of national law by Puma Energy.

If the situation deteriorates, Manning says, the government will issue new directives to prioritise supplies for essential services.

Long-term solution

Clearly, PNG’s ongoing foreign exchange shortages are at the root of the current crisis. According to the Bank of PNG, Puma sourced US$458.6 million in domestic foreign exchange in 2023, around one-third of the bank’s entire allocation.

Banking arrangements for the company are also up in the air following its bank, BSP Financial Group, giving it notice that it would close Puma’s bank account on 7 June (recently extended from 8 March).

In a statement, Puma Energy says its decision to reduce the size of its operations and fuel supply “came after extensive engagement with various government stakeholders, including the Bank of Papua New Guinea to find a long-term and sustainable banking solution”. It is urging the government to set up  a task force “to minimise the impact on fuel supply disruptions to communities and the economy.”

“We understand an interim solution is underway.”

Despite the current challenges, Puma Energy says it “remains committed to staying in PNG in the long term” and addressing its “banking capacity”.

Industry warnings

POMCCI’s Rio Fiocco

The Port Moresby Chamber of Commerce and Industry last week warned that PNG’s economy could “shut down” unless a long term solution is found.

“It’s a major concern to everyone,” says Rio Fiocco, the chamber’s president. “Most of the country will shut down if there is no fuel for airlines, generators, cars and trucks.”

“This fuel impasse must be addressed,” John Byrne, president of the Lae Chamber of Commerce, tells Business Advantage PNG. “We understand an interim solution is underway”.

“It is critical to the economy that we have fuel for aviation, transport and maritime. They are the lifeline for our community and businesses,” he says.

In the short term, the shortages will raise costs for companies which rely on generators for backup power.

“The fuel issue is a challenge for now, but we are managing,” Paul Komboi, CEO at state-owned telecommunications wholesaler, PNG DataCo, tells Business Advantage PNG. “The real problem is power issues, hence the need for fuel at our sites through PNG.

“If we can overcome the power issues, then we will not be worried about fuel issues.”