Besides the Benefits to PNG, the 40,000-bbl-per-day PNGOR oil refinery will cause the real cost of petroleum products to be reduced (unlike a competitive proposal which will require tariff and import barriers to hold up the price of petroleum products in PNG). At the moment, PNG imports products refined in Singapore or Australia.  The cost in foreign currency is offset by the export of the indigenous Kutubu crude oil (from the western part of PNG).  But the landed cost per barrel in PNG of refined products has a margin above crude oil prices of approximately US$5.70.

In relation to petroleum product consumed in PNG, this represents about US$30 million per annum that is going out of the country in foreign exchange.  PNGOR will bring another US$30 million or so from exported petroleum products.  In its first year of operations, this is about US$73 million - a flow to the PNG economy in wages, transportation, supply and service contracts, dividends to local equity, and a tax (after the 5-year tax holiday standard for PNG) of US$17 million per annum.  A multiplier of three means an annual benefit of US$220 million.  With the landed cost structure (not including duty) of product, there is now no benefit to the country whatsoever.

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