ENVIRONMENT
PAPUA New Guinea is truly the land of the unexpected as they say and that puts it into perspective with the current fuel crisis.
This country should not be effected by energy crises. The country is floating on oil reserves but fails to reprocess the crude oil into finished products for domestic use and export. Instead its exports of its crude to other countries to process and refine into finished products. These finished products are then imported at much higher prices than the export price.
Oil refineries
Oil from Kutubu and other oil fields as well as those under the PNG LNG project could be utilised fully to process crude oil into finish products such as jet fuel, diesel, petrol, kerosene and oil.
What is the issue here that continually allows export of crude oil to overseas countries for reprocessing into finish products? Does the country lacks processing capacity with its refineries, definitely not. If they lack capacity, improvements have to be made to cater for increase capabilities. Or do we lack trained manpower to work in these refineries, definitely not. So what is the point for the Government of PNG to allow huge oil tankers into the country and ship these crude to far off land for reprocessing while it is equally capable to reprocess the same crude oil at home. Few years ago there were shortages in Jet Fuel supply for our Jet propelled aero planes and Kutubu Oil Fields were called upon to supply Jet Fuel using its refineries and they successfully did it. Isn’t this testament to utilize these in country refineries.
Recent developments in logging operations
The PNG Government has recently taken a bold step to band export of round logs and put emphases on downstream in country processing. What is the difficulty in doing the same with the oil and gas industry?? Or does that shift damages politicians and bureaucrats from losing out on hidden peeks and privileges. Surely there must be some reasons to keep exporting crude oil while the country is equally capable of reprocessing and refining the crude into finish products in Jet fuel, diesel, petrol, kerosene and oil. The country already has the necessary infrastructure including qualified manpower. So what is the issue??
Negotiations
During negotiations in development agreements, clauses must be included to restrict export of crude oil and emphasis placed on downstream processing. This is not a difficult task, why the failures or are we protecting hidden interests. Importance should be placed on its infrastructure and manpower needs. Facilities to be upgraded and additional infrastructure added to existing facilities.
Equity
The politicians and the bureaucrats are so concern about increasing equity but what they fail to realize is that, the country has to pay for every percentage point of equity. The reality is this, the country pays equity from borrowings and repayments are made out of annual budgets which means that money is taken away from important developments projects and essential services.
In the editorial of the National dated 8th April 2026, it states that, “the PNG LNG project in full operations extracts volumes equal to 1,300 cubic metric tones of crude oil which is calculated to about 8 million tones annually”. That is a massive volume of extraction that sadly finds its way to overseas markets. If we fully utilized local or in country refineries, the estimated USD750 million /3.2 billion Kina bill for imports each year will not be here. Forex will be a walk over by that amount.
First shipment of crude oil was made in 1989. Ever since that day, 32,000 barrels of crude oil is extracted daily reaching a peak of 50,000 barrels per day at its highest. There are a few crude oil refineries in the Kutubu Oil field. The refinery at Angore produces diesel fuel required for the projects own uses. These refineries can reprocess crude oil into refined finished products as Jet fuel, diesel, petrol, kerosene and oil. The volumes produced are less as the capacity to process large volumes are limited.
The country will need to expand the processing and refining capacities of its oil refineries. What need to be done is to refurbish the existing infrastructure in increasing their capacities and construct new larger processing plants that will adequately absorb increased volumes of crude extracted daily.
Each time there are fuel crises erupts at global level, PNG is seriously affected. Such are the cases in 2024 and this year. Just when is the Government going to learn from these experiences and consider actions that are both required at all levels, policy, legislation and technology to improve for a better tomorrow for our nation. Economics of scale and less use demand are the easiest excuses for not wanting to improve for the better. Take the easy way out as they say but for how much longer.
The editorial of Friday 8th April 2026 states that, “according to worldometer, PNG produces 32, 313 barrels oil daily and the country consumes 42, 716 barrels daily now that is 10, 403 barrels more in consumption daily. That simply tells us that there is significantly high demand for fuel consumption in PNG so why keep exporting rather than improving in country production facilities and do away with exports and stop this issue of export equity and concentrate on providing essential development and services the country badly needs.
Crude oil are processed and refined into the main products such as Jet fuel, diesel, petrol and kerosene. And that is not all, there are also a range of by produces produced from the main stream such as additives and cleaning chemicals and a lot more other products.
Let’s look at some logical market calculations. We export one product only and that is crude bulk oil for processing and refining in overseas facilities. In so doing in exporting that one product (crude oil) we earn an income for only that single product. This crude oil is than processed into manly more marketable products for various market prices that will be well above what was paid for that single product. In other words, they will be earning more than what they paid for that single product. PNG earns less in comparative prices for its export of crude oil and pay more for import of finished products. So put an end to it by stop exporting and encourage downstream processing. To begin, the Government needs to take an audit of the oil industry and development relevant policies supporting by legislation and technological facilities including manpower requirements and save the country for spending money on equities and improve country development goals and provide better services to its people.
Gas
We have not discussed the extraction and processing gas but the story is not different to that of crude oil processing and marketing.
Most politicians don’t really understand the technicalities and make decisions which they assume to be good for the country but fail in doing so. So what they need are team of advisors in various fields to guide them. In some cases, the politicians are advised by experts who are not qualified in the fields they are seeking and are wrongly advised and the sky comes crushing down. For instance, if a Mining Minister seeks advisors he should look for expertise in that field such as geologists, mining engineers and relevant expertize. Don’t consult an expert (advisor) on Forestry because that is not his field of expertise.
ICCC in its press statement “Resetting of Fuel Prices – 16h April 2025” levels make some steering reference in stating. The first k100 million was ade available on 14th April 2026. This is the most interesting self-defeating point, “The relevant agencies, including Department of Treasury, Bank of Papua New Guinea, Department of Finance, ICCC, Internal Revenue Commission, PNG Customs Services, Department of National Planning and Monitoring, and the Office of the Chief Secretary are working on the fundamentals and the implementation framework for the Government fuel relief packages.
The ICCC in yet another of its statement says that, “ the current relief package is a decisive measure to protect PNGs economy and people from externa shocks. With strong leadership and transparent administration, and upfront funding, the Government is stabilizing fuel prices, securing supply, and reinforcing public confidence in its economic stewardship. Now how true is this statement in the long term, is it only when the country is hit with fuel shortages that it reverts to short term corrective and pressure relieving measure. Sure we are not fooled by this same government failure without out finding long term solutions that will stop money leaving the country and the government failing its responsibilities in project developments and welfare of its people. Enough of these short sighted relief measure and consider permanent solutions.
Now now now, this is a real joke and these are bunch of jokers who are climbing all over the fence trying to find solutions every time PNG is hit time and time again when world affairs influencing fuel supply. Why can’t these heavy government machinery start looking at long term, long lasting solutions to fuel supply shortages to PNG. And they don’t need to look any further than our in country oil and gas field and its refineries.
The extraction of crude oil and gas from our fields comes well above exceptional volumes yet all of it is exported to overseas countries for reprocessing and refining before re-entering PNG domestic market at higher import rates. And not only the main refined products such as Jet fuel, diesel, petrol, kerosene and oil. But a ranges of other by products at their own market prices. This simply means that the country is earning less for the export of its crude oil and reimport at higher prices. So how do we put a stop to it?
The answer is clear to everyone, even the grassroots who do their little marketing daily with their buai sales know this mathematical formula. Buy at low prices and sell at higher prices or export at higher prices and import at lower prices.
The answer is well clear, downstream processing is our possible solution to fuel crises and not mentioning market economics and equities. The Government has started with the forestry projects banning export of round logs and emphasising on downstream processing.
Why can’t the Government with its heavy political and bureaucratic machinery do the same with its crude oil and gas?
