Fiji’s fuel proposal

Business

Whether FINAPECO means cheaper fuel remains to be seen

By Martin Tiffany

THE three multi-national oil companies operating in Fiji - Mobil, Shell and British Petroleum have finally agreed to buy petroleum products from the government-owned Fiji National Pet

roleum Company (FINAPECO). How

ever, neither they nor FINAPECO has said on what terms the agreement was reached.

Since FINAPECO was established in December 1 990 to be the sole importer yf petroleum products into Fiji, the three multi-nationals have objected to it. The jii companies had said it would basically be a one-supplier, one-ship operation *ith no support infrastructure and that uel would cost them more.

At a meeting of regional energy ministers in Fiji on August 29 —30, 1991 he oil companies presented figures vhich showed they would have to pay 53.10 more per barrel to FINAPECO.

FINAPECO has defended itself saying t has the backing of an international letroleum company with access to eflneries world-wide through ESSO Singapore which is a subsidiary of the ;iant EXXON Corporation. Prices, they ay, would be equal to or lower than the

•il companies’.

While in office Fiji’s former Minister of inance, Josevata Kamikamica, had said hat oil prices should not be higher in Fiji nd if a profit were made by FINAPECO his would be passed on to the consumer hrough a reduced fuel tax currently bout 50 per cent of bowser sale price.

The oil companies now have agreed to uy from FINAPECO but have kept uiet on why they have finally decided ) do so. FINAPECO general manager ikuila Savu refused to comment when pproached by Pacific Islands Monthly.

Fiji’s Prime Minister, Ratu Sir .amises Mara, said the ultimate objec ve of establishing FINAPECO is to itablish a Fiji or regional oil refiner) 7 .

In his report on the interim

government’s achievements he said the first step was to establish FINAPECO to buy crude oil, refine it and supply the refined products to the existing oil companies for distribution. Ratu Sir Kamisese said this would give Fiji some control over the source and cost of the fuel. He said he hoped the newly-elected government would closely study the viability of establishing a Fiji or regional oil refinery as it would not only provide security in a volatile industry but also give the economy extra capacity for growth.

FINAPECO’s Savu has said, however, the establishment of an oil refinery in Fiji did not necessarily guarantee cheaper oil prices as prices were set internationally.

He said studies were still underway on

the viability of establishing a refinery.

Meanwhile, a report on Fiji’s environ ment, released by the Fiji government last month, says; “Some years ago there was a suggestion that Fiji should acquire its own refinery, but this option is now generally regarded as not economically viable due to the scale and the make-up of the demand.”

The report, titled Environment : Fiji The National State of the- Environ ment Report, was prepared for the Fiji government by lUCN the World Conservation Union for the National

Environment Management Project.

Savu said if a refinery were established the cost of transportation would be cut and a refinery would bring in investment and an increase in shipping. Also oil by products would be available more

cheaply.

The formation of FINAPECO and the selection of ESSO Singapore as its partner after tenders were called inter nationally, attracted strong opposition from the oil lobby in Australia, New Zealand and the Pacific region.

Ratu Sir Kamisese said he strongly believed the treatment Fiji got from the oil companies was unjust adding that those in position of government leader ship “have a responsibility to defend the

nation’s economic interests when they are threatened”.

He said that the oil industry in Fiji had been controlled by a multi-national oligopoly for about 50 years.

“To me, it was a situation in which government intervention would be stra tegic - similar to action we took in the 1970 s with the sugar industry,” said Ratu Sir Kamisese.

“The oil oligopoly’s contribution to, or involvement in, the Fiji economy, outside its own immediate infrastructure, is virtually non-existent. There is not a single simple blending plant, or even a joint move by the oil companies to establish an oil refinery here.

“It appeared that whatever profits have been made over the years have been regularly repatriated out of the country.”

He said that developing countries, when moving into manufacturing and industry to complement their agricul ture, found that control of their energy sector became more and more crucial in determining the direction and pace of economic advancement.

Ratu Sir Kamisese said that when considering the possibility of establishing a Fiji petroleum company, government thinking was influenced by its inability to persuade the oil companies to help them, an offer of crude oil for sale by some South —East Asian countries and trade boycotts by Australia and New Zealand unions in 1987.

FINAPECO expects its first shipment of petroleum next month from Malaysia

via Singapore.

Under the agreement with Malaysia, FINAPECO buys 10,000 barrels of crude oil a day from Malaysia’s PETCO. Esso refines this in Singapore and ships 210,000 barrels to Fiji each month. 2.52 million barrels, worth FSISS million, are expected to imported by FINAPECO each year.

The Malaysian company PETCO is a divison of Petronas Trading Corporation which is a subsidiary of the Malaysian state-owned Petroleum National Berhad.

Basically all the Fiji consumer can do is wait until the first tanker from

Singapore docks.