Maritime operators boost PNG's economy

Some 15 of PNG’s 22 provinces are coastal or island provinces, with these regions also home to around 60% of the country’s inhabitants. Thus, road links outside the main cities are sparse, and commercial and passenger traffic from the periphery to the country’s urban centres is often done by sea. Furthermore, PNG occupies a strategic position on north-south routes between northern Asia and Australia and New Zealand. Major international shipping lanes cross the Bismarck Sea, which lies to the north of mainland PNG and encompasses New Ireland and Manus Island, and the Solomon Sea, between the mainland, New Britain and Bougainville.

Maritime Nation

The two largest ports in PNG are those of the capital, Port Moresby, and Lae, with the latter the busiest. Lae is the second-largest city in the country and capital of Morobe Province, on the northeastern coast. Both are run by PNG Ports Corporation (PNGPC), which also runs 14 of the country’s other main ports. Mining firms operate 11 ports, with an estimated 400-plus smaller jetties and harbours operated by local communities. PNGPC replaced PNG Harbours Limited in 2006 as the country’s main operator.

Given the importance of the ports to the country’s economy overall, the government has focused on their development in recent years. A series of plans has been produced to provide a roadmap for this. These begin with PNG Vision 2050; the Development Strategic Plan (DSP) 2010-30; and the five-year Medium-Term Development Plan (MTDP). The latest MTDP was completed in early 2015 and a new one is beginning roll-out the same year. All these plans make ports an area of focus.

Facility Upgrades

With the emphasis on ports, Lae Port has been undergoing a major upgrade in recent times, with the first phase of a tidal basin project completed in December 2014. This new facility, which will be run by PNGPC, cost over PGK700m ($264.9m) and has the aim of making Lae a central port for large vessels serving both PNG and Asia Pacific. The Asian Development Bank (ADB) funded 70% – making it the bank’s largest maritime initiative in the Pacific to date – with the state contributing the remainder. The Independent Public Business Corporation (IPBC) was the implementing agency and the China Harbour Engineering Company undertook the work. The project adds two new container berths to the port, which, when added to a third also recently completed, dramatically increases Lae Port’s container capacity. The project also sees the expansion of storage and warehousing areas; improved electricity, sewerage, water and drainage facilities; dredging; and new crane improvements.

The Lae Port already accounted for some 60% of PNG’s overall trade, according to statements in the local press from Minister of Public Enterprises Mekere Morauta. Almost all the country’s coffee exports ship out through Lae, while the port has also grown in line with PNG’s liquefied natural gas (LNG) industry. For example, machinery and equipment for the large Hela Province LNG project has been coming through the port.

The minister’s figures would illustrate rapid recent expansion, too. Up to date data for trade through the country’s maritime gateways was unavailable at the time of writing, yet PNGPC’s 2012 annual report stated that Lae handled 51% of the corporation’s overall cargo volume that year, while Port Moresby handled 24% and the third-largest port, Kimbe, handled 8%. These three were also cited as the three profit-making ports in PNGPC’s portfolio. The fourth-largest was Rabaul, with 4%.

The most recently available figures indicated the overall cargo total was 7.9m revenue tonnes in 2012, up 3% on 2011. Some 336,740 twenty-foot equivalent units passed through the nation’s ports, with 63% of these deriving from international trade and the rest from coastal trade. In terms of vessel calls, there were 7322 at PNGPC’s ports in 2012, with overseas calls accounting for 54% of these. Port Moresby was the nation’s leading port, in terms of port calls, with 31% of the total that year. It is thought these totals likely declined in 2013, however, as the construction of LNG projects wound down, but no more recent data was available when OBG went to press. The working environment has also become more competitive in recent years. “Margins are shrinking at the moment, as competition has mounted and the level of economic activity has diminished considerably since the completion of the LNG project,” Tony Raats, general manager of logistics firm Agility, told OBG. “I anticipate some consolidation.”

Building Up

Major expansions are ongoing. In 2012 Port Moresby (POM) received upgrade and PNGPC invested in three rubber-tired gantries, with these and mobile harbour cranes improving efficiency. In 2013, the firm then budgeted for the reclamation, acquisition and development of the Port Moresby naval base. Most recently, in October 2014, plans were discussed to relocate the port, with a site identified at Motukea. A deal was reportedly struck between PNGPC, the IPBC and Curtain Brothers for a PGK725m ($274.4m) project moving POM’s wharfs to a site previously used for transport equipment during construction of the PNG LNG plant. “The relocation of POM will be one of the most important developments for the city’s functionality, as it will offer plenty of new opportunities right in the middle of the business district,” Peter Langslow, CEO of Steamships Trading, told OBG.

At Alotau Port, PNGPC is investing in wharf upgrades that allow the port to accommodate more cruise ships. At Oro Bay, a PGK10m ($3.8m) rehabilitation has begun, with IPBC and PNGPC upgrading old wharves. POM has recently seen investment in a new depot by GFS, which transports material and equipment for the oil and gas industry. The company now operates a barge that can navigate the rivers of the interior as well as serve drilling platforms in the Gulf of Papua.

Indeed, PNG’s shipping firms have been expanding as well. Bismarck Maritime, for example, has more than doubled its capacity to 13 vessels over the past seven years, on the back of growth in the hydrocarbons, minerals, and food and beverage segments. The sector has otherwise long been dominated by Steamships Trading, which has 16 coastal vessels operating in PNG waters, according to its 2014 annual report.

Even Steven

As for stevedoring, PNGPC does not provide its own services, but contracts out. At Lae Port, it does this with three firms: Riback, United Stevedores and Lae Port Services. At POM, United Stevedores and Port Services are the main sub-contractors. The Independent Consumer and Competition Commission monitors prices to ensure competitiveness. Another key body is the National Maritime Safety Authority (NMSA), whose duties include search and rescue, controlling marine pollution and improving ship safety. The NMSA has received major assistance from international donors, with the ADB beginning work on a navigational aids rehabilitation project back in 2000, then extending this into a wider safety project in 2012. These projects seek to redress deficiencies in hydrographic surveys, tide gauge networks, and the installation and maintenance of the automatic identification system. Safety has thus been improving for ships traversing through PNG’s waters.