EXECUTIVE DECISION NEEDED TO FIX PUMA FUEL CRISES

by SAM J KAUPA

The Napa Napa oil refinery Project Agreement was recognized by many of us as a serious concern to the PNG economy and concerns were raised as early as 2000. DPE participated in many meetings organized by ICCC. Treasury, IRC, Customs, Commerce & Industry and PM's Dept always also participated in these meetings. In my capacity then as a junior officer and backroom advisor, I raised issues with Clause 19 of the Project Agreement and proposed certain actions.

At one time, an Australian oil refinery industry expert was contracted by the State/Treasury to advise the Government on the Napa Napa oil refinery Project Agreement and he did make very clear and strong recommendations to the Government.

No executive decision was made since. Expert advice ignored!

DPE's functions are limited by the Oil & Gas Act 1998 to the upstream petroleum industry only. It has no regulatory mandate in the downstream sector, which includes oil refineries and refined products.

The regulation of the downstream petroleum sector lies with other State agencies but apparently there exists a very clear lack of mandate in Law for the effective regulation of this sector and this was partially a contributing factor why the Napa Napa oil refinery Project Agreement was never reviewed and the Import Parity Price clause and anti-competition issues never adressed.

I recall recommendations made to the executive level as early as mid-2000 to open up competition in the fuels market as Napa Napa oil refinery also continues to breach the Project Agreement by directly importing refined fuels from Singapore and Melbourne, Australia. It also imports crude oil. Other distributors like Mobil too are importing directly from Singapore, importing cheaply and maximizing huge gains. I suspect they are taking advantage of Napa Napa's Import Parity Price Clause. This creates an imbalance in the fuels market and consumers are denied of the correct economic price of fuels.

In response to ICCC's letter to the Vice Minister for Treasury in 2017, I established an internal committee headed by our Economics Division to jointly work with other relevant State agencies to address issues raised by the ICCC CEO. Progress was very slow for many reasons. The oil refinery operator and owner also avoided all attempts to get details of their operations. I then directed my officers to consult PNG Customs. The information we received from PNG Customs was shocking, particularly the manner in which the operator was conducting its operations. By then I was out of the scene.

But there is more than enough technical and economic data and information available, as well as advice and recommendations, for an executive decision. NEC has to act on those recommendations and advice, including the recommendations by the Australian consultant in mid-2000.

In fact, PNG's national energy sector can be well managed and its national energy security and pricing issues effectively addressed without having Napa Napa oil refinery being in the equation. As a private citizen, I spent quality time and provided an advice to the executive Government in July 2019 on precisely what to do for the State to fully own and control the entire energy industry and market without being dependant on Napa Napa oil refinery and other commercial arrangements with foreign-owned businesses. Maybe no one read it.

This whole matter now requires an executive decision and direction.