Published in the June-July 2012 PNG Report magazine

A computer modelling of what the finished tidal basin project will look like with its one new berth

Logistical delays and associated rising costs, which mainly arise from the combination of strained infrastructure and resource boom-fuelled demand, are a constant source of frustration for Papua New Guinea's business and industry circles.

While many of the challenges are well-known and accepted, it can be hard to get business leaders to discuss them on record.

"Everybody is complaining about the delay times in Port Moresby and Lae," a notable business figure told PNG Report.

"I hear it all the time, especially from the manufacturers and the Chamber of Commerce guys who are trying to move general cargo across the wharf. There's a huge delay time."

In many ways PNG's port inefficiencies further contribute to the high inflation rates that get clocked up in the country each year.

"If your stuff sits on the wharf you have got to pay for it," the business figure said.

"That's the annoying thing about it."

He said shipping costs in PNG were already astronomical.

"Domestic shipping costs are huge. You could ship to London cheaper than you can ship round our coast."

Essentially the problems are threefold - high freight rates, extra costs if your cargo is stuck on a wharf for a week or more and the business opportunity loss from not receiving the cargo within expected timeframes.

Against this backdrop is the promise of further development for Lae's port.

Dredges were first mobilised as part of the Asia Development Bank-funded Lae port expansion project back in the early 80s. But this was abandoned due to a successful campaign from landowner and provincial government interests.

Times have changed. The project was revived about four years ago and has since won support from landowners and the provincial government. The ADB remains behind it and chipped in $US200 million while a reputable source indicates that PNG government funding has reached 285 million kina so far, which includes costs from an additional government loan.

Two contracts have been awarded for the resurrected project. Korean Engineering Consultants Corporation was awarded a $4.9 million contract in late December.

China Harbour Engineering Company - which is very experienced in dredging jobs - won the K734 million ($346 million) construction contract in late March with construction activities underway in May.

Expected to take 30 months to build, this contract covers a multipurpose berth and terminal works which includes buildings, roads and utility infrastructure.

The project is due for completion halfway through 2014, but there are already some concerns over whether this development is big enough.

The dredging will encompass an area of 700m in length by 400m wide, providing enough room for future expansions, but only one 240m-long berth is planned in this new zone under the existing project.

Meanwhile, a source that is familiar with Lae's port is convinced there are better opportunities.

For starters he would like the new berth to go for the full 700m so three 200m-long vessels could tie up to it.

But going by the size of the dredging area, the source believes 1400m of berth could become available.

Ideally he would like to see three berths developed on one of the 700m-long sides of the project area.

"One berth is not going to bring down congestion that much," the source told PNG Report. As a rule of thumb, he expects one new berth will cut about half a day from the average delay currently experienced at Lae port.

"Three berths would allow PNG Ports [Corporation] to develop the port in such a way that in theory and in conjunction with other productivity drives, could get rid of all the congestion."

"Lae at the moment is too small for the volume of traffic going through so this will solve that problem. With mining projects and everything else we are getting about 30 per cent (demand) growth every year."

The construction workforce for the project will mainly be from PNG aside from some Chinese technicians.

While there is no shortage of critics over port delays, PNG Ports has halved anchor times over the last three months from four days to less than two days through recent improvements which have included the introduction of mobile harbour cranes and rubber tyred gantry cranes.

The state-owned enterprise also plans to introduce a terminal operating system at the Lae and Port Moresby ports.

Update: The Post-Courier reported this morning that the Independent Public Business Corporation needs an additional K210 million of funds to complete the project.