Puma’s dilemma explained

Chairman/managing director HULALA TOKOME, in an interview with business editor PETER ESILA in Port Moresby on Sunday, explains the Puma Energy PNG Group of Companies’ need to have foreign exchange to continue operating in the country.

Question: Can you tell us why Puma Energy requires Foreign Exchange?
Tokome: Access to US (United States) dollars is amongst the most important requirements we have at Puma Energy PNG.
Like all energy importing companies, we have to buy fuel on the international market in USD and then sell it to our customers in PNG in Kina.
International companies will not accept to be paid in Kina – so we need timely access to the FX market in PNG to convert the Kina we receive from our customers back into USD in order to buy more fuel cargoes to support the energy needs for people in PNG.
Puma currently has US$90 million (about K325.6 million) of outstanding FX orders, which we need to pay our suppliers to enable us to import fuel, so the situation has become critical.

Is this a problem that is unique to Puma Energy? Why don’t we hear other energy companies having the same challenge?
We can’t speak on behalf of others, but we understand that we have by far the largest demand for USD of any private company currently operating in PNG.
For instance, every month we require anywhere between US$40 million (about K144.7 million) and US$60 million (about K217.1 million) to buy fuel from the international market — this range of course depends on what the international price of fuel is.

We understand that Puma Energy received FX on Friday?
Yes, indeed.
We are thankful for the US$12.7 million (about K45.9 million) of foreign exchange received on Friday.
But as I just mentioned, our monthly requirements are much greater.
At today’s fuel prices on the international market, US$12.7mil is not enough to help us buy the fuel needed to address the looming shortage.
Also, don’t forget we have over US$100 million (about K361.8 million) or now US$90 million (about K325) of outstanding invoices in FX that we need to pay our suppliers.
So the situation still remains very serious.

Does PNG have a FX shortage problem?
We don’t believe these issues are from a lack of FX availability in PNG.
On the contrary, PNG’s FX reserves are about US$4 billion (about K14.4 billion).
This is the highest it’s ever been for the last 25 years and this a reflection of our improving economy and a great achievement by Prime Minister James Marape and his team.

Why does Puma have to ration supplies when it doesn’t have enough FX?
First of all, for us fuel rationing is the option of last resort because of the difficulties it creates for the community, our customers and our business. We always try our best to avoid it until we are left with no other option.
It is aimed at extending the use of the fuel we have left.
We have to make sure this fuel is available for emergency services, hospitals and critical infrastructure, such as power generation.
We take our obligations very seriously – rationing and the need for it are not our choice but simply the best way of managing the difficulties created when we cannot obtain the FX.

You have told us that the situation is critical. How much time are we talking about before running out of fuel?
The situation is imminent but also entirely avoidable.
We are more than willing and ready to work with the authorities to resolve any outstanding issues.
We are grateful to the senior authorities for their keenness to resolve these issues to avoid disruption.
When we don’t have the FX to buy the new fuel, we then need to extend the availability of whatever we have left until we have the FX to purchase more.
And when we are not getting enough FX and only getting small amounts, then we can’t plan and purchase enough fuel for the long term.
We need plenty of inventory to ensure security of supply. Also, even if we were given more FX today to purchase a new cargo, the earliest it will arrive is in mid-August, so our operations team is under enormous pressure to manage that process and that is why we are urgently calling for help to avoid the need to ration. It makes it very difficult for us to run the business and ensure security of supply for PNG and the community.

So what are the issues you are working on with the FX regulator – Bank of PNG?
That’s a great question.
We are grateful to the Government for their leadership in trying to resolve issues.
We have been trying to get to the bottom of this with BPNG – and while we have been working together closely we are still not clear on all the remaining issues.
We do not believe there are any fundamental differences.
We believe we have addressed several matters and we have taken onboard BPNGs input on various items.
As of today, and as far as we are aware, the only remaining issues relate to interpretations of administrative requirements and customs documentation, which are tied to international oil trading norms and best practices.
We believe we are compliant with these issues and these can be easily resolved.
However, importantly these issues are not only limiting our access to FX, but are also restricting our access to our core financial services.
If our financial services are restricted, we simply can’t operate and this is a major and immediate problem.
So resolving these issues is critical and that is why we are asking the Government of PNG to support our discussions with BPNG.

How does Puma Energy suggest resolving the urgent outstanding issues with BPNG?
First of all, we are all trying to work together in the best interest of everyone involved—including our community, our customers and our local work force.
At the end of the day, safe and reliable energy is what we want for PNG. At this stage, it is critical that we accelerate the process and reinstate Puma’s access to FX and address the restrictions that are being placed on our core financial services – these are very urgent topics.
We believe we are compliant with recent matters raised by BPNG – which as I mentioned earlier we understand are really just administrative and relate to different interpretations of administrative requirements and documentation tied to international oil trading norms.
In fact, one idea could be to help inform these requirements by sharing different international trading standards or perhaps convene a workshop with BPNG with industry experts to help demonstrate how these practices are applied.
The most important thing, and what is in everyone’s interests, is to resolve this quickly.
It has now reached an urgent stage with the outstanding FX orders and the restrictions on our financial services – we need these two issues addressed “yesterday”.

Tell us more about Puma Energy and its business in PNG?
Puma Energy entered PNG about 10 years ago.
Since then, we have invested around US$15 million (about K54.2 million) annually, close to US$150 million (K542.7 million) in total.
We’ve invested in refurbishing and rebuilding our retail sites, aviation facilities, tankage facilities and many other services.
Today, we employ about 500 people, the majority of which or 95 per cent are Papua New Guineans.
Also, we indirectly employ close to 2,500 people in the PNG community across retail, transport, PumaGas and other segments which involve micro, small and medium enterprises.
We have also invested in the community, with over half a million US dollars (about K1.8 million) a year.
Specifically, we’ve collaborated with Port Moresby City Mission, Buk Bilong Pikinini, St John’s Ambulance, Susu Mama and YWAM (Youth With A Mission) prior to the Coronavirus (Covid-19) among many other community initiatives.
Looking ahead, we have plans to invest in PNG and have a number of projects we would like to kick-off, but the current situation has limited us from doing so.
We have a five-year plan to invest about US$100 million (about K361.8 million) in new retail facilities, solar energy projects and upgrades to our network of storage facilities across the islands and airports.