In a direct response to the ongoing disruption of fuel supplies in Papua New Guinea, Petroleum Minister Kerenga Kua has declared an extraordinary 30-day State of Emergency. Its terms mandate all key players, from the central bank to major fuel importer Puma Energy and financial institutions, to work to resolve the causes as soon as possible.

Puma Energy’s Napa Napa refinery is PNG’s only oil refinery. Credit: BAI

The State of Emergency, PNG’s first since the COVID-19 State of Emergency of 2020, was declared by Petroleum Minister Kerenga Kua on 31 July, with powers granted under the National Energy Authority Act 2021 and Essential Services Act 2002.

‘This Declaration of Emergency is made as a direct result of the current disruption in the supply and distribution of fuel and petroleum products and foreign exchange,’ Kua said in a statement.

By declaring a State of Emergency, the government has proclaimed ‘banking, financial services and provision of adequate foreign exchange’ as essential services. By so doing, it hopes to ensure the flow of fuel and petroleum products into PNG and ensure the country’s energy demand is permanently stabilised.

‘Without the government’s intervention, this crisis will directly affect the country’s energy security, disrupt government services and businesses, and generally have a negative impact on the economy and welfare of our people,’ said Kua.

Disruptions

The move follows ongoing disruptions to the supply of fuel in PNG including, but not limited to, the provision of aviation fuel to national airline Air Niugini, which was forced to cancel all domestic flights one day last week due to ‘the imposition of jet fuel restrictions by Puma Energy’, the country’s largest fuel importer (international flights were not affected). The airline was forced into similar cancellations during December 2022 and January 2023.

Puma Energy announced last week that it was introducing fuel rationing due to a lack of access to ‘sufficient FX and financial services’. PNG has experienced ongoing FX shortages since 2015 and Puma Energy is its largest purchaser of foreign exchange.

‘Our hands are tied and we are growing more concerned with every day that passes,’ said Hulala Tokome, Chairman and Managing Director of Puma Energy Papua New Guinea, in a statement. ‘While we have temporarily reinstated supplies as a gesture of good faith, necessary actions have not been taken by other parties.’

Account closures

Puma Energy’s Hulala Tokome

While Tokome acknowledged the efforts being made by the Bank of Papua New Guinea (BPNG), PNG’s central bank, to make additional foreign exchange available, he described Puma’s access to financial services as a ‘more urgent’ concern.

According to the Declaration of Emergency issued by Kerenga Kua, ANZ and Westpac have already closed the bank accounts Puma has with them, while BSP Financial Group has given Puma notice that it intends to close its bank accounts on 8 September.

‘Our access to financial services is still in limbo,’ said Hulala Tokome. ‘We have had no explanation of the issues restricting our access to financial services.’

While as-yet-unresolved allegations made against Puma by the Bank of PNG, which date back to September 2022, will be a focus of enquiries during the State of Emergency period, Kerenga Kua made no connection between those allegations and the bank account closures in his declaration.

‘This action taken by the BSP is occurring independently of the Government and Bank of PNG’s influence and is purely a global banking and finance response,’ he said. He also said ANZ and Westpac had acted ‘independently’, implying other as-yet-undisclosed factors were behind the banks’ moves.

Plan of action

Petroleum Minister Kerenga Kua. Credit: PNG Chamber of Mines and Petroleum

Minister Kua’s declaration, active until 31 August, effectively puts a temporary stop to the current disruptions, by charging the central bank with ensuring that Puma Energy can access its BSP accounts during the 30-day State of Emergency period.

Kua has also instructed BPNG to provide authorised foreign exchange dealers, including BSP, with a supply of FX during the State of Declaration period to enable ‘unhindered production and supply of fuel’. Puma Energy has also been instructed to ‘maintain the supply for fuel and other petroleum products’.

The Petroleum Minister will now chair a series of ’roundtable conferences’ aimed at resolving the underlying issues, including BPNG’s allegations against Puma Energy, in order to report back to the National Security Council and National Executive Council before the end of this month. He has not ruled out extending the State of Emergency beyond 31 August.

He also issued a clear warning to parties involved in the emergency:

‘The Essential Services Act imposes very strong penalties against individuals and corporate persons should they fail or refuse to comply with directions issued under the emergency declaration. Take note, the Government through the Minister responsible will not hesitate to enforce those penalties.’