Volcano eruption affects palm oil production in Papua New Guinea

Two volcanic eruptions and a heavier than usual rainy reason will lead to a 19% fall in palm and palm kernel oil production in Papua New Guinea for Belgian agribusiness firm Sipef.

An eruption at Mount Ulawun volcano on 26 June had led to the immediate evacuation of 7,000 people and covered 50% of Sipef’s oil palms (on more than 6,500ha) with a 3-5cm layer of ashes and small stones, affecting the July harvest, the company said on 5 August.

A second eruption occurred on 3 August at the same volcano.

“The immediate effects of the second eruption are comparable to the first one in June,” Sipef said. “More than 5,000 people were evacuated out of the Navo production areas closest to the volcano to safer places near the Barema mill and estates.”

Sipef said that although no important permanent asset losses were recorded requiring reconstruction or replanting, it was not possible to harvest on 3,150 planted hectares (about 23%) during most of July and its Navo mill was temporarily closed down.

“At the Navo plantation, 950ha out of the most affected areas will require up to two years of recovery before producing bunches at normal yield again,” Sipef said.

“Although production on all other planted areas have resumed, it is likely that the second eruption will also affect part of the August harvesting operations and the quality of the palm oil produced, as the impact of the ash and small stone deposits on the Navo estate palms and Navo mill are comparable to the impact of the first eruption.”

Sipef added that its Hargy Oil Palms estate had already experienced a worse than usual rainy season in the first semester of 2019. Combined with the two eruptions, it was projecting a fall of some 19% in palm and palm kernel oil production for this year, compared with 2018, representing a pre-tax loss of some US$14M.