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Actions to Reduce Landing Costs of Petroleum to Tonga by 2020

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19th September 2018 The GOT has approved to reform the petroleum sub-sector and invest in the constructing of additional new petroleum storage facilities, and modify the petroleum storage ownership business models to allow and encourage competition thereby improving affordability, fuel security, access, sustainability and safety to the Kingdom’s consumers and businesses.

The cost of accessing and utilizing energy, consumes a significant potion of our daily income and business revenue. On a National level, Tonga’s annual bill is 10% of GDP and 15% of National Imports. This is a significant amount. Given these facts, the GOT has been focusing on the Energy Sector to find a solution and methods to ensure energy access, safety, sustainability, security and affordability are achieved.

Part of the solution lies in increasing and improving Renewable Energy generation and utilization, energy efficiency and the enabling environment – grid and legislation. But despite these efforts, Tonga still relies heavily on fossil fuel, with its high and volatile pricing, for its electricity generation and the needs of its transport sector with most of the cost drivers involved with the petroleum importation, beyond Tonga’s control and influence.

Various studies on the subject have concluded that the goals can be achieved through: 1] making Tonga an MRT port, 2] better ownership arrangements to facilitate this initiative 3] and allowing/encouraging competition for supply and management.  These are different methods and models from the current models of operation.

The above actions, implemented over a two years timeframe, will increase the efficiency of the petroleum supply chain. Making Tonga a MRT port will enable MRT to service the Kingdom directly from Singapore and thus avoids coming through Fiji and paying for the associated costs. The extra storage tanks will allow for a ‘strategic reserve’ and thus prevents fuel shortages from occurring.  GOT regulatory functions will continue, including regulating pump retail prices to ensure that cost reduction due to efficiency and competition are passed on the  Kingdom’s consumers.

The GOT has accepted the above models and is prepared to go all the way in making the reforms, changes and even investing its resources to ensure Tonga Consumers have access to safe, secure, sustainable and affordable energy.

The setting up of the investment vehicle [including potential public and private , identifying funding and tendering for companies or partners to construct the extra storage tanks has commenced with the necessary changes in the business and management models also starting at the same time.



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