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PNG govt defends gas project but landowners grow restless

Peter O'NeillJOHNNY BLADES | Radio New Zealand

AUCKLAND - Papua New Guinea's prime minister, Peter O’Neill, has lashed out at a new report saying the country has not benefitted from its huge ExxonMobil-led liquefied natural gas project.

The report by social justice organisation Jubilee Australia said the US$19 billion LNG project had failed to create jobs or spinoffs for PNG's economy despite big promises by political backers.

The Jubilee report said ExxonMobil's project had created mostly negative economic impacts for the country since LNG exports began in 2014.

A co-author of the report, economist Paul Flanagan, says that on the projections of rapid growth and an influx of easy money from the project, PNG's government went on a spending spree from 2013-2015 which has since crippled the economy.

"In terms of the economic impacts, the promises of a doubling of the size of the economy, massive increases in employment and government expenditure, those items just haven't happened," Mr Flanagan explained.

“Even on the measure of GDP - instead of doubling the results indicate there has been a negligible improvement and all of that has gone to the oil and gas extraction sector. The rest of the economy has actually gone backwards."

Exxon defended its side of the arrangement, while the government has linked the project's lower than expected revenues to a global oil price slump.

Mr O'Neill used Monday’s speech at a PNG-Australia Business Forum meeting in Brisbane to respond to the Jubilee report.

"It's quite disappointing to note that some of our experts, who align themselves with political interests, continue to try and talk down the economy, and continue to release fake news," Mr O'Neill said.

"And in one particular comment recently, they said - and I quote - currently on almost every measure of economic welfare in 2016 PNG would have been better off without the PNG LNG project. Now that kind of assessment is just an utter nonsense."

PNG's National Planning minister Richard Maru said there were some basic reasons why the project's projected revenue windfall hadn't materialised.

"But you must also understand, we borrowed money. The investors also borrowed. And they have to retire loans that they used to fund the project. At the moment, they've been going through that phase," Mr Maru said.

"While that's going on, the price obviously came right down, so that also impacted on cash flows and the profitability of the LNG business in PNG. But the prices are going up now, and we're quite excited about the next few years."

Meanwhile ExxonMobil PNG Ltd issued a statement defending the social and economic benefits it said it was bringing to PNG.

Exxon said the project had contributed around $US4.3 billion to local businesses and the government through employment taxes, disbursements to state shareholder agencies, development levies, royalties, and petroleum license fees.

"In local communities, we have invested more than $US246 million to build infrastructure, develop social programs, and implement skills training. Our efforts have a tangible and direct impact on the community," an Exxon spokesperson said.

Of the almost 2,600 people employed or contracted by the LNG operations, "approximately 82% are Papua New Guinean, and 22% are women," the spokesperson said, without elaborating on comparative remuneration of expats compared to PNG nationals.

But one of the areas of most concern in Jubilee's report was that most landowners in the project's Highlands hub, particularly those around the gas fields of Hela province, still hadn't been paid royalties or benefits they were promised.

According to Exxon, royalty payments due to the government had been ongoing since gas production started in 2014.

"Payment and distribution of royalties and other benefits due to landowners in the project area is the responsibility of the PNG government."

The issue of non-payment of dues to landowners in the project's hub remains explosive, particularly with the lingering threat by landowners to shut the project down if their interests aren't met.

The government had managed to defer the issue after landowners delivered it an ultimatum in 2016, saying a clan vetting process to establish all legitimate landowners needed to be completed first.

But in the current difficult circumstances in Hela after the devastation of February's magnitude 7.5 earthquake, the patience of landowners may be wearing thin.


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Mathias Kin

We are living in a time of corrupt leadership. A civil war may not be too far off. Perhaps they will listen then.

JK Domyal

It has become a common practice adopted by the PNG prime minister to downplay any critic or comment with data presented by independent assessment of the nation’s economy.

We have witnessed such derogatory remarks and mere excuses from the Prime Minister over the years. Even MPs in the opposition providing counter policy advice and criticism are simply turned down by the PM.

The scapegoat in his blame games is always pointing to the former PNG governments, the fall in the global economy, the decline in the prices of oil and gas, and even accusing career bureaucrats of gross corruption or accusing business houses of evading taxes.

The real crux of the overall downfall in PNG economy is in the keys and hands of a few political elites, which the PM himself is part of.

He can either start economic reform or indulge himself in the cause and ignore better warnings and policy options offered by experts and think tanks in the country and abroad.

An obvious case is the promised royalty payments for the PNG LNG project over the last 4 or 5 years of operations. Where is the money, is a question for PM to answer. At one time he said it was safely kept in a trust account with BPNG; another time he referred it to being kept in Singapore.

With the recent earthquake disaster in Hela, SHP and WP early this year, this money would be better put to use if the royalty payment arrangement with landowners was in place.

In the near future, the landowners from the PNG LNG project sites who were affected by the earthquake and aftershocks will really want to know what happened to their promised royalties.

This pending payment may seem a trivial task for the government, but it is a major treachery to the landowners as far as their value and linkages to their motherland is concerned.

It is a sleeping time bomb, it can flare anytime (landowners will rise against the government and project developers). We have witnessed such case with BCL in Paguna in the 1980s.

Philip Fitzpatrick

Everyone and their dog in Hela are claiming to be landowners. Sorting out the right landowners is a nightmare.

The anthropologists that the government have sent in to do the work have even been sucked into some of the claims.

Even the basis of what constitutes a landowner in Hela culture has yet to be fully established. Brand new systems of 'traditional' inheritance have been invented in an attempt to get a piece of the royalty cake.

In this sense, the legitimate landowners have been compromised by the dishonest people in their own society.

Sorting this mess out is rightly the responsibility of the project developers, Exxon Mobile, Oil Search and the other partners.

Why the PNG government allowed these companies to shift the responsibility onto them is a mystery. Unfortunately it's not the first time this sort of thing has happened.

The Australian company, Oil Search, is the only one out of this whole sorry saga that has tried to do the right thing and has actively contributed to social development in the province. If not for them the whole thing would be a lot worse, if that is possible.

Mr O'Neill has got another potential Bougainville on his hands. And it is likely to come to a head just as he is refusing to acknowledge the will of the people in that province expressed in a referendum.

Last week in Australia he unequivocally stated that the PNG parliament would never vote for Bougainvillean independence.

2019 is going to be a very interesting year in PNG. If the appalling situation in Manus is still going on, Australia will be hamstrung in its reaction and will not be able to help.

PNG is currently speeding towards a gigantic train wreck and nobody in Australia gives a stuff.

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