Think the mining boom has made a big difference to the Australian economy?
Well, it’s nothing compared to what appears likely to do for Papua New Guinea, where a consortium of companies have just agreed to proceed on a project to build a liquified natural gas project that will double Papua New Guinea’s GDP:
ExxonMobil and its partners have agreed to press ahead with a $15bn liquefied natural gas project in Papua New Guinea that would represent the largest foreign investment in the country to date.
The US group said that, once completed, the PNG LNG deal would treble Papua New Guinea’s exports and more than double its gross domestic product, which stands at around $8bn.
The PNG government has a 16% stake in the project; local landowners will own a 2.8% stake. The Australian government is making a $500 million loan available to kick-start the project.
That’s a massive money pile, both in terms of the amount to be spent in the country, and the amount of revenue that will accrue to the PNG government. It would have to go a long way to making the PNG government financially independent, and leave a large amount left over to greatly improve the lot of the vast majority of rural citizens of PNG who remain impoverished.
But is that going to happen? Jubilee Australia, an NGO who focus on this sort of thing, believe not, as they’ve discussed in this open letter to the responsible minister, Simon Crean opposing Australia’s assistance in the project as it currently stands. In their view, most of the proceeds will go to a relative few and be squandered on corruption.
But is it really better for PNG to be poor and corrupt than richer and corrupt? And what could be done differently to ensure that PNG’s poor majority are helped, given that a) it’s not our gas, and b) it’s sufficiently valuable at the moment that the PNG government probably doesn’t really need our money to get the project off the ground?
It would be better perhaps if the loan could be a little more conditional – if the PNG govt would go for it. I agree wholeheartedly that your average PNGer won’t benefit – the country is as corrupt as hell.
An article in the SMH last month looked at ways to deal with the “poverty dividend” of this project.
For the record, the lead partner in the PNG LNG consortium is OilSearch rather than ExxonMobil. OilSearch holds the lease over the Highlands area where the gas was found.
There is a second LNG plant project planned for PNG, drawing on a gas and oil find in the Gulf province north of Port Moresby. It’s about a year behind the OilSearch-Exxon project. If it goes ahead it could deliver the same economic impact.
They could set up an transparent oil revenue fund, like the East Timorese have. Its a low-risk portfolio, invested in New York, and by law the government can only withdraw a set % of interest (not principal) for annual budgets.
Its designed to short circuit the oil curse – and it does so, in part (corruption in minimised). How it avoids the other part of the oil curse (that oil dependent states dont tend to diversify their economies) is of course a matter of what the government does with the revenue and other policy settings – so there’s no guarantees there.
PS we’re no doubt lending the startup money: a. because the AU-PNG aid relationship is well established, and we’re the logical donor, but also b. to prevent the Chinese doing so.
Why would we worry about the chinese developing gas projects in PNG? Domestic politics?
Strategic reasons, Ute Man.
I think the Australian government would very much prefer it if PNG continued to see us as their friendly regional power, rather than looking first to Beijing.
There may be an element of paranoia in such an attitude, but only an element.
We worry about China developing the project because they can then set terms on the purchase of the LNG. We’d hate to see that – as we want to charge them top dollar for our own LNG.
So, the feds consider this a peak oil play, without acknowledging peak oil as a strategic threat? Clearly the chinese take the idea pretty seriously if they’re investing in gas wells that will be lucky to last 10 years.
I can see the spectre of Bourgainville copper in this if the PNG ‘big men’ don’t get it right in terms already discussed. Whether the PNG highlanders understand the terms of a Timor style fund will be an interesting question. I was surprised by the very low percentage of children who attend any sort of schooling in PNG.
A massive increase of wealth for a nation like PNG is likely create massive problems for them, opposed to the massive problems they currently face. There’s an old saying, “Rich or Poor, Rich is Better”. The opportunity to deal with the problems of corruption, environmental degradation, violence towards women, improving educational opportunities, health services can come about when financial viability is achieved. as we see in so many third world and emerging nations around the world, unless you have good govenance, the rule of law and an equitable distribution of wealth, it can all end disastrously for the people. I am a cup half full person so hopefully PNG can take this opportunity and make the life of their people a whole lot better than it is now.
OilSearch has had a long time committment to PNG so I hope they can act as an advocate to reign in Exxon’s polluting practices.
Exxon Mobil’s Baytown refinery, the largest in the nation (US), got the company’s biggest fine — about $500,000. It included 23 offenses, including a 17½-hour release that included 5 tons of sulfur dioxide, a half-ton of ammonia, more than 130 tons of carbon monoxide and 900 pounds of hydrogen cyanide. http://www.chron.com/disp/story.mpl/metropolitan/6754870.html
It feels somewhat like Nauru and phosphate mining. I can’t see this LNG project as is doing much to relieve poverty in that country.
Just off the top of my head, if there was a commitment to set up educational facilities in Port Moresby and other large towns to train up staff – from the very basis of high school education through to tertiary level – instead of importing them from overseas, it would probably be a lot better for the country.
Train up PNG nationals! Right. Exxon want to get in and out before PNG nationals wake up to how exploited they are. Look what happened to Bougainville Copper when they trained up Francis Ona to be a surveyor.
The PNG politicians aspecially the politicians from new Hela Province, the home province of the LNG project have hijacked the Licensed Based Benefit Sharing Agreement to their benefit and benefit of very few landowner leaders. For the Angore project, one of the 4 project PRL sites, the frastrated leaders tore the agreement at the time of the agreement so there is no agreement in place. In sum, the politicians and the developer will force the project but there will be more resistance on the ground and the fat dogs in Waigani -the National Parliament of PNG, will get fatter will people continue to fight for thier right.