PNG's mining industry promotes growth in transport

The recent surge of natural resources out of Papua New Guinea, along with the inflow of manpower and material needed to develop industrial infrastructure, is fuelling demand for transportation and logistics services internally and internationally. Although the country lacks established international trade hubs and the associated scales of economy, the lure of PNG’s lucrative resources remains incentive enough to establish more efficient transportation links from which to boost international trade.

The ongoing expansion of PNG’s extractive resource industries, which often provide the impetus for greater transportation connectivity, is also being aided by basic organic trade growth through a growing list of international trade agreements, both regional and global. Although the country is not yet included in some of the most prominent trade groups, such as the Association of South-East Asian Nations and the fledgling Trans-Pacific Partnership, PNG has signed on to a number of other regional agreements such as: the South Pacific Regional Trade and Economic Cooperation Agreement; the Pacific Island Countries’ Trade Agreement; the PNG-EU Economic Partnership Agreement; the Pacific Agreement on Closer Economic Relations Plus; and the Melanesian Spearhead Group Trade Agreement.

Good Neighbours

PNG also has a handful of bilateral deals with its largest trading partner Australia, including the PNG-Australia Trade and Commercial Relations Agreement; the Agreement for the Promotion and Protection of Investment; the Double Taxation Agreement; and the Torres Strait Treaty.

The tangible advantages of developing transport infrastructure can be seen in the huge investments made as part of the PNG liquefied natural gas (LNG) project, which saw hundreds of millions of dollars spent upgrading road, sea and air links from the coast to the highlands, which will benefit the private sector and the public for years to come. The PNG LNG project is not an outlier in this, as surges in transportation demand and the resulting infrastructure upgrades follow a historic pattern in the country, most recently the mining boom of the 1980s.

As these projects unfold they create knock-on effects which are now driving secondary demand for logistics and support services, providing a substantial boost to both sea and air transport providers.

Remote Access

The domestic air network has always been key to PNG’s development, with the lack of land connections giving air a primary transportation role usually reserved for the more efficient road and rail. As economic development spreads into ever more remote areas of the country, these links have become even more vital, with demand for imported machinery and goods showing no signs of abating.

The amount of air freight moving around PNG has doubled from 17.1m tonne-km (mtk) in 2003 to a high of 33.4 mtk in 2014, according to the World Bank. Air freight figures are calculated as the volume of freight, express and diplomatic bags carried on each flight stage, measured in tonnes multiplied by km travelled. The most dramatic growth in the sector has mirrored the waves of investment into the extractive industries, the first coming with the development of copper and gold mines in the late 1980s, during which air freight increased from an average of 8-9 mtk per year prior to 1988 to 12.9 mtk in 1989 and 18 mtk by 1995. A decade of inconsistent air freight movement followed, before a second surge in air cargo resulting from the PNG LNG project investment in 2010, as cargo flights rose by 48% from 19.3 mtk in 2009 to 28.5 mtk in 2010, and have continued to steadily increase since.

Up in the Air

This boom catering to PNG’s extractive resources and seafood exports has created opportunities for both domestic airlines, such as state-owned Air Niugini, and a host of charter services, but has also attracted larger regional competitors. With much of the workforce and material for these industrial products sourced from Australia, its national air carrier Qantas moved to take on a growing piece of the expanding market when it launched a new weekly freight service between the two countries in June 2013. “This is a popular freight route with increasing volumes in both directions, particularly for seafood, general cargo, mining equipment and machinery,” said Qantas’ freight executive manager, Lisa Brock. The state of Queensland is a major source of supplies for PNG’s mining sector, while also serving as a transit point for some of the country’s Japan-bound fresh tuna exports.

Tonne Deals

The new cargo flight came a month after Qantas subsidiary Express Freighters Australia, along with Sydney-based Skyforce Aviation, applied to the Australian International Air Services Commission (AIASC) for 53 tonnes of freight capacity per week each way for Australia-PNG routes. A bilateral air services agreement signed in 1980 provides for 100 tonnes of air freight per week in each direction. Skyforce Aviation, which operates Pionair in PNG, applied for 18 tonnes of this, which it was allocated by the AIASC in July 2013 for a period of three years. Pacific Air Express also extended its permit for an additional five years in April 2014 to move 17.5 tonnes per week between the two countries.

Passenger Traffic

A similar trend took place in passenger flights over the same period, as employees working to develop the industries were shuttled in and out of PNG. With the resource development boom of the 1980s, flights increased nearly threefold from 1983 to 1984 from 18,300 to 55,400, according to the World Bank. These figures included both registered carriers departing domestically and takeoffs abroad of air carriers registered in PNG. Passenger traffic peaked in 1989 with 71,400 departures, before dwindling to less than 30,000 by 1995. The next boom, which started in the late 2000s, saw departures jump from 21,450 in 2009 to 32,741 in 2010, up 53%, after which annual departures have averaged 34,438 between 2011 and 2014.

Additional capacity continues to be added by foreign carriers eager to wrestle market share away from Air Niugini. Virgin Australia applied for an allocation of 160 seats per week for an Australia-PNG route in May 2014 but was granted a 108-seat allocation by the AIASC for five years later that month. Qantas also renewed its 888-seat-per-week allocation for an additional five years in March 2015.

Contrast

Illustrating the dynamic effect that air transport has on internal and external links, shipping container traffic has grown at a much more controlled rate, without the spikes seen in air travel. While air freight saw a dramatic 48% increase between 2009 and 2010, for instance, container traffic in PNG rose by just 3% from 254,592 twenty-foot equivalent units (TEUs) in 2009 to 262,209 TEUs. The sector has since shown moderate but stable growth as traffic has risen each year, to a high of 363,750 TEUs in 2014.