Pacific Magazine > Daily News

Petrol Price Hikes Bring Threat Of Legal Challenge

By Alexander Rheeney in Port Moresby
Saturday: December 08, 2007

The standoff between a foreign-owned oil refinery and the Papua New Guinea government over its decision to hike petrol and diesel prices continues despite the threat of legal action.

Canadian firm InterOil Corporation – which possesses Papua New Guinea’s only petroleum refining plant and has a 30-year project agreement with the government to be the country’s sole petroleum products supplier – last week abruptly increased its petrol, diesel and kerosene prices.

The move triggered a public outcry when diesel prices in main centers such as Port Moresby jumped from K2.65 (.90 cents) to K2.81 (US$0.96) a liter, petrol K3.11 (US$1.06) to K3.27 (US$1.11) and kerosene K2.52 (US$0.87) to K2.68 (US$0.91).

The increases were even higher for centers outside the PNG capital such as Lae, Madang, Mt. Hagen and Kokopo on New Britain Island.

InterOil President and Chief Operations Officer Bill Jasper told the Post-Courier newspaper they had to increase the price as the delay by the PNG government to approve a new pricing formula would have cost the company close to US$5 million in losses.

However, PNG’s consumer watchdog the Independent Consumer and Competition Commission (ICCC) has warned that it could be forced to go to court if InterOil did not rescind its decision.

“The commission has written to InterOil on this matter and advised InterOil to rescind their notification and to have prices revert to levels announced by the commission on 8th November 2007. If InterOil does not comply with the commission’s lawful orders then ICCC will have no option but take appropriate legal action against InterOil. The commission is well aware of the current situation regarding fuel supplies and is in close dialogue with InterOil, Mobil and key state agencies, particularly the Department of Treasury,” said ICCC Commissioner and CEO Thomas Abe.

It is understood the PNG government is currently giving urgent consideration to the possible amendment of the project agreement between the state and InterOil with a view to allowing an interim arrangement which would address the concerns raised by the Canadian company.

But until such time the amendment is made to the agreement, Abe said, “Domestic fuel prices that should currently be applied are those that have been approved by the Commission and formally announced on 8th November 2007’, with the next monthly fuel price change due on 8th December 2007.”

Government-funded think tank National Research Institute (NRI) has also lashed out at InterOil’s monopoly powers with its researchers accusing the company of holding the nation to ransom.

It is understood the fuel price hike has only been implemented at InterOil-owned service stations with Mobil Oil New Guinea, one of three main players in PNG’s petroleum industry, refusing the apply the increases until the government made a decision.