New ports and upgrades boost Papua New Guinea's maritime trade potential

 

Two major port projects have been approved by the Papua New Guinea government, with expectations that they will enable the country to play a greater role in regional trans-shipment and encourage economic development. Lae Port’s capacity is being expanded, and work is underway to relocate Port Moresby’s main port from Fairfax Harbour to Motukea Island. Other upgrades include improvements to Customs inspections and operations, the acquisition of container-scanning equipment and the commissioning of passenger vessels to ply new routes.

Port Operators

PNG Ports Corporation (PNGPC) operates under the authority of the Department of Transport. In addition to managing the maritime compliance of PNG’s ports, harbours, wharves and jetties, it also has authority over berthing, pilotage, storage and wharfage services for cargo passing through the country’s ports, which handle more than 5.8m tonnes annually. PNGPC is a state-owned entity (SOE) whose ownership is vested in trust with Kumul Consolidated Holdings on behalf of the PNG government.

One of the oldest SOEs in PNG, the corporation manages 15 of the 23 declared ports in PNG: Lae Port, Port Moresby, Kimbe, Madang, Alotau, Rabaul, Kavieng, Oro Bay, Kieta, Buka, Vanimo, Lorengau, Wewak, Daru and Aitape. However, of the 15 declared ports operated by PNGPC, only three – Lae Port, Port Moresby and Kimbe – are profitable, with the remainder continuing operations under a community service obligations programme.

“We really don’t make money – there is no great volume of demand there, but we continue to invest in the ports as part of our service charter,” Stanley Alphonse, CEO of PNGPC, said on the occasion of the start of his second term in April 2015.

Under the charter, a regulatory contract with the Independent Consumer and Competition Commission and the Harbours Act, PNGPC has a responsibility to maintain all its ports at an operational level.

The PNGPC is involved in several maintenance projects, including a PGK45m ($15.4m) investment in Alotau port to increase capacity for large cruise liners, a PGK45m ($15.4m) investment in Kimbe’s port to cater to increased activity in West New Britain’s oil palm industry and a PGK10m ($3.4m) investment in Oro Bay’s port facilities. Other projects in the pipeline, according to Alphonse, include large projects in Aitape and Rabaul. PNGPC was appointed project manager for a PGK100m ($34.1m) port facility being built in Aitape, while Rabaul’s port is set to relocate.

LAE Port Upgrades

Located at the end of the Highlands Highway, Lae Port is well placed to boost PNG’s trade activities. Yet although the port handles about half of the country’s exports, it has suffered from underinvestment and will need to modernise to meet the demands of international trade. In light of this, the first phase of an upgrade was completed at Lae Port in 2014. The project was financed by the Asian Development Bank (ADB), who contributed $189m; the OPEC Fund for International Development ($6m); and the governments of PNG ($95m), Japan ($1.25m) and Sweden ($750,000).

By increasing the capacity, safety and efficiency of the port and its operations, the upgrade has opened up opportunities for increased cargo throughput. New port facilities include a multi-purpose berth capable of handling containers, a deep protected harbour for large container-carrying vessels, a 240-metre-long wharf and container yard for offloading and storing cargo, as well as terminal works including new buildings and storage areas, roads, drainage, and utility services. In addition, the Lae Tidal Basin was upgraded with two additional container berths. When combined with another recently added berth, the port’s overall capacity has effectively tripled in recent years. The Lae Port renewal was a partnership between the ADB, the government of PNG, and the Independent Public Business Corporation.

However, it has not all been plain sailing for Port Lae. While phase one of the port’s upgrade was completed in 2014 at a cost of PGK809m ($276.2m), it is currently undergoing remediation works because of recent evidence of major structural defects. Fixing such problems could cost an additional PGK200m ($68.3m) – an expenditure that will be borne by the contractor that carried out the first phase, China Harbour Engineering Company (CHEC).

Remediation of the defects, which concerns the integrity of the sea wall slope protection, are not expected to affect port operations.

CHEC is being considered for the second phase of the redevelopment project, which was expected to start in 2016. Phase two will see a second PGK300m ($102.4m) berth built at Lae Port as well as an industrial park. The second phase is expected to involve a public-private partnership, with an international operator being sought for the port.

PNGPC is planning to install a second berth of at least 240 metres to be built adjacent to the recently built container terminal, which will add an additional 240 metres of quay line capacity. With the second berth, two vessels of up to 200 metres would be able to dock at the same time, according to comments made by Alphonse.

A key part of the Lae Port development is the estimated PGK258m ($88.1m) Huon Industrial Park, which will be the base for a mineral export facility as well as a storage area for dry bulk materials, wet cargo and feed stocks. In addition, Alphonse said, PNGPC was in discussion with potential tenants from mining, petroleum, power and fisheries industry stakeholders for long-term concessions at the park.

The awarding of contracts for phase two was expected to begin by the end of 2015, but as of early August 2016, the contract for the second phase had not been awarded. Alphonse said the authority was soliciting interest from terminal operators to run either or both the Lae Port and Port Moresby’s Motukea terminal, which is set to be relocated.

Redevelopment

The relocation of Port Moresby’s port will ease traffic congestion and growth issues in the city’s central business district, Fairfax Harbour. This is being done as part of a plan to develop the national capital into an economic trade hub.

In July 2014 PNGPC acquired Motukea Port from engineering, construction, and property development company Curtain Brothers for PGK725m ($247.5m). The state is investing a further PGK300m ($102.4m) in the new port, with financing agreed with Bank of South Pacific in November 2015.

Located 12 km from Port Moresby, Motukea Island is a 106-ha development site equipped with steel fabrication equipment, a dockyard and wharves. Motukea Port’s facilities consist of three 530-metre berths, expanded storage and wharf capacity, room for increased container traffic and additional space for development and expansion.

Safety First

PNG’s reef-strewn waters can make navigation dangerous for international and domestic ships, while many of PNG’s lighthouses have also fallen into disrepair. To remedy this situation, the ADB has already supported the repair or replacement of 211 beacons. This work is continuing under the Maritime and Waterways Safety Project, with a loan of $40.4m loan from the ADB matched by $6.6m from the PNG government to repair or replace a further 132 lighthouses and navigational aids.

In another boost for PNG’s shipping industry, in March 2016 PNGPC took steps to upgrade its pilotage services by purchasing portable pilot units. Pilots are able to use these computerised units as a decision-support tool for navigating in confined waters by using an antenna and an electronic chart display to show the vessel’s position or movement in real time.

Sister Ports

Raising the stakes on its ports development projects, in February 2016 PNGPC struck up a sister port relationship with the Shenzhen Port Administration from the People’s Republic of China.

In an address at the signing ceremony, PNGPC’s Alphonse noted that PNG can learn from Shenzhen, adding that PNGPC values the opportunity to develop trade between PNG’s ports and the port of Shenzhen.

At the same ceremony, Powes Parkop, governor of the National Capital District, forecast that Lae Port and the port at Port Moresby will become significant hubs in the Pacific region, adding that the sister relationship provided PNG’s ports with “a good opportunity to share skills, knowledge and information on the port business and trade between both ports.” With improvements both ongoing and planned, as well as safety and security in the forefront and rising international recognition, the priority for PNG’s ports in the near future should be to establish private-sector investment and management, which will help reduce the costs of doing business in PNG and maximise the benefits of the upgrades. When these elements are in place, PNG’s ports will be in a strong position and a major contender to become a regional maritime hub.

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The Report: Papua New Guinea 2016

Transport chapter from The Report: Papua New Guinea 2016

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