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Fuel Pricing
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Fuel Industry Regulation
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Alternative Fuel Development Projects
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Question(s) and Answer(s).
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Tonga Competent Authority (TCA) is the regulatory body of petroleum
prices in Tonga under MCTL.
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Fuel prices changed on a monthly basis and reviewed annually.
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LPG price changed on quarterly basis and reviewed annually.
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Price verifications is conducted by Hale & Twomey Ltd, petroleum
consultant from NZ.
Petroleum prices are regulated by TCA under Section 5 of the Price &
Wages Control Act 1988 administered by MCTL.
Tonga market is supplied by 2 major oil companies (Pacific Energy &
Total Fiji).
Fuel Quality/Standards – ULP 92 RON, ADO-500ppm, DPK- dual purpose
kerosene.
Lowest cost supplier sets the single market price.
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Fuel prices are determined and built up based on TCA approved
parameters in the Tonga Fuel Pricing Template (TFPT).
TFPT component includes;
 Weighted average of published daily MOPs prices
 MR Freight considers the Worlsdcale rates for 3 ports
discharge, freight rate assessment and the voyage premiums
 Insurance cost
 Product premiums and ocean losses
 Demurrage allowance
 Storage and Handling cost in Fiji
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LCT freight to Tonga
Wharfage & Duty
Distribution cost & Return on investment
Consumption Tax
Retail Margin
Local charges
 Wharfage.
 Taxes:-Duty and Consumption Tax.
Government Duty
 Unleaded Petrol-50spl
 Diesel-50spl
 Kerosene-exempt from duty.
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Diesel for Power generation is exempt from Duty.
Government also imposed 15% Consumption Tax on the price of
all imported fuel.
Breakdown in product cost components for November 2014
price:
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Diesel
Oil Company Cost & margin7%
Duty, taxes and wharfage34%
Freight Fiji to Tonga5%
Fiji Freight, storage and handling-5%
Singapore FOB49%
Petrol
7%
34%
4%
7%
48%
Retail Margin is currently capped at 14 seniti/litre for
Diesel and Petrol
RETAIL MARGIN
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TCA approved in 2007 a 7% retail margin, a shifting from 6 seniti
per litre (fixed).
Due to hike in the prices in 2008, TCA approved in 2009 to cap
the retail margins at 14 seniti/litre for petrol and diesel, and
11.30 seniti/litre for kerosene (excluding Consumption Tax).
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No changes were made to the retail margin caps following the
2014 Annual Price Review.
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TCA has approved to review the retail margins in the next Annual
Price Review, 2015.
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Consultations with the retail outlet is underway to allow timely
preparation of required information for the price review.
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Price restatement occurs monthly based on Oil Companies
submissions following agreed timeframe for price revisions.
Monthly price restatement adjusts changes in the exchange rate,
MOPS, Bunker rate while other components are reviewed annually.
Annual Petroleum Pricing Review covers adjustment on operating
cost, freight, Insurance, Ocean loss, demurrage, ROI, Distribution
costs etc.
TFPT components are reviewed based on the 4 different
methodology below:
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Monthly restatement of product prices;
Annual Review of supplier`s statutory audited accounts;
Triennial Review assessing the entire regulatory regime; and
Ad hoc review of various costs and profit elements
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TCA under the Ministry of Commerce, Tourism and Labour is the
Price regulatory authority in Tonga.
Role of TCA is to fix the maximum price of 15 regulated goods
including petroleum products.
TCA was established under Section 5 of the Price and Wages
Control Act 1988 to perform the following functions:
 Fix Maximum Prices of Goods or Services
 Prescribe manner to obtain maximum price
 Fix Minimum Wage Rates
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There are 5 permanent member of the TCA Committee and 2 coopt members.
The TCA Committee is chaired by the Minister for Commerce,
Tourism & Labour.
Primary purpose
Act of Parliament
Price regulation
Price and Wage Control Act 1988
Environment Protection
Waste Management Act
Environmental Impact Assessment Act 2003
Marine Pollution Prevention Act 2002
Licensing
Business Licenses Act 2002
Petroleum downstream supply
chain
Petroleum Act
Safety
Fatal Accidents Act
Shipping
Shipping Act
Marine Insurance Act
Carriage of Goods by Sea Act
Taxation & excise duty
Consumption Tax Act
Revenue Administration Act 2000
Customs and Excise Act
Weight and Measures Act
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There are 3 points worth mentioning about Tonga`s laws
and regulation for Petroleum Sector:
 Tonga`s laws and regulations make reference to international
regulations, conventions and treaties;
 Tonga`s laws and regulations are old; and
 Petroleum sector safety and environmental risks are managed
by the petroleum industry applying both company specific
and international standards.
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Acts affecting the pricing of petroleum products in Tonga
are:
 Petroleum Act;
 Price and Wage Control Act; and
 Customs and Excise Act, which provides import duty
exemptions on fuel imported for use in power generation and
domestic airline and shipping.
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TCA under MCTL regulated 15 goods.
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List of goods controlled by TCA: Rice, Sugar, Flour, Salt, Butter/Margarine, Baby Milk, Tea,
Coffee/Milo/Cocoa, Edible Oil, Cheese/Dripping, Infant Goods for
babies,
White
benzene,
All
lubricant
oil,
Insecticide/weedicides/fungicides for agriculture use, Chemicals,
fertilizer for agricultural use.
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MCTL Price Control Division monitor and enforce
compliance with the Price and Wages Control Act.
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Tonga currently has no legislation standards.
 Petroleum Act and Regulations allow for fuel testing but do not appear
to specify fuel standards for Tonga.
 Tonga`s petrol and diesel fuel standards are largely determined by the
Oil suppliers with the approval of the TCA.
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Tonga effectively supplied with same fuel standards as Fiji, the main
fuel supply hub for Tonga.
Tonga shift from 5000ppm to 500ppm in 2011.
Although there is an international shift towards higher quality
standards fuels, there is no proposed plan for Tonga.
Oil companies operate under international standards for petroleum
handling and storage.
 International standards are more stringent and specific than the general
requirement set out in Tonga`s Petroleum Act.
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LPG gas suppliers operate to standards set by the Australian Gas
Association (AGA).
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Waste Plastic
Enterprise.
into
petroleum
by
Eagle
Pacific
Plant will recycle plastic to create “sweet” crude oil
(low sulfur without little contaminants), and refine
the oil into consumer and business grade fuel.
Feasibility study to be conducted on Biofuel using
algae over coconut, cassava and other local
resources.
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Lack of expertise;
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Lack of trainings;
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Outdated legislations;
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Lack of financial resources to carry out timely reviews;
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No regular reviews of fuel quality standards in Tonga;
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Late submission of audited financial report from Oil
Companies;
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Lack of greater scrutiny of petroleum company costs.
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MRT direct from Singapore to Tonga (bypass Fiji);
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Review legislations;
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Regular review of fuel standards;
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Revise petroleum pricing system with the assistance of
SPC
Utilise potential biofuel;