LNG places PNG on the world map ....but transparency of its benefit sharing is a big concern

IT is time Papua New Guinea goes all out to attract business investors as part of a spin-off from the US$10 billion PNG LNG project. But the international community did not mince their words when they referred to the high law and order problems, lack of transparency, infrastructure shortcomings, the economy subjected to volatility in its export earnings, and lack of investment on basic health and primary and universal education.
Although dividends and profits from the PNG LNG project is expected to drive the country’s development and growth, the Government’s failure to address these social issues remains the biggest challenge facing the nation.
Nearly all sectors of the economy from building-construction, mining and petroleum, agriculture, fisheries, forestry, both formal and informal sectors have experienced increased activity. This has had a flow-on effect that trickled on to other sectors like wholesale, retail, the hotel industry, housing and land.

Business performance would have been more if it had not been for the world financial crisis in the latter half of 2008 that has resulted in many major economies now facing recession and world commodity prices fall with declining demand.
The 27-nation European Union’s (EU) nearly two percent economy shrink this year poised one of the worst recessions on record drives unemployment and government deficits to levels not seen for years.
But yet PNG has managed to enter the Front-End Engineering Design (FEED) stage in the nation’s undertaking of it’s most ambitions and biggest investment project ever – the US$10 billion PNG LNG project.

The PNG LNG project has placed PNG on the world map and has captured the attention of the world’s leading mining and petroleum companies and large financial and banking organizations. There were comments made during the recent 10th PNG Mining and Petroleum Investment Conference in Sydney, Australia that amid the world crisis PNG is one of the few shining lights in the world.

Interest in PNG’s Mining and Petroleum sector was evident in the record 800-plus participants at the conference where Minister for State Enterprises Aurther Somare said the PNG LNG project had the potential to positively change the nation’s economy and improve the living standards of its six million people.
At its peak the project will generate revenue between US$600-800 million annually. Many speakers during the Sydney conference including PNG LNG Venture Manager Peter Graham all echoed similar sentiments.

However, a big issue of concern now is transparency and accountabilities and having the right policies in place. The government needs to explain to the people how they benefit. One of the few remaining major hurdles of the project is the Benefit Sharing Agreements (BSA), which is planned for March 2009. This will see the government, developers and landowners agree on the benefits to landowners.

Landowners have expressed desire to have an increase in royalty considering that the project will impact about 100,000 plus landowners in four different provinces Southern Highlands, Gulf, Western and Central provinces. It is now clearly known to the landowners that

There are two types of Benefit Sharing Agreement (BSA) and development forums for landowners. Umbrella BSA to be signed in March 2009 for Early Works. Single License Based BSAs’ to be signed by June 2009 before Final Investment Decision. In both of these agreements, the landowners must walk off satisfactorily and it’s the Government role to facilitate it.

Leader in the PNG LNG project ExxonMobil’s Managing Director Patrick Henretty said the landowners were happy on the proposed benefits from the PNG LNG project, after conducting environmental impacts in the project affected areas. Again it’s the government who acts on behalf on the landowners to ensure that they are truly happy on the proposed benefits.

One the same note, ExxonMobil’s Brisbane based executive, Peter Graham urged all landowners and community leaders to adopt a united stance in forming an “Umbrella” company prior to March in preparation of Umbrella BSA to carry out early works of the project.

Having said this, landowners must not brawl amongst yourselves over the benefits but stand united and strategically visualize the benefits for our children, grandchildren and generations yet to come for this beautiful nation of ours. Talk about the next thirty years and beyond of the life of the project and it’s benefits sustainability. We must not only think for our own stomach but for others in the future too.

Until then as usual, always remember! God loves PNG and we do too.

Note: This column acknowledges the comments made by Juha gas field landowners, which forms part of this article.