PNG govt defends gas project following damning report

10:52 am on 3 May 2018

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

Exxon Mobil PNG's LNG plant near Port Moresby

Exxon Mobil PNG's LNG plant near Port Moresby Photo: (C)2014 {Richard Dellman/AdvantagePNG}, all rights reserved

The report by social justice NGO 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," he 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 has defended its side of the arrangement, while the government has linked the project's lower than expected revenues to a global oil price slump.

The Prime Minister of Papua New Guinea Peter O'Neill

The Prime Minister of Papua New Guinea Peter O'neil Photo: Supplied

The Prime Minister Peter O'Neill used yesterday'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 Papua New Guinea. 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 246 million USD 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 2600 people employed or contracted by the LNG operations, "approximately 82 percent are Papua New Guinean, and 22 percent are women," the spokesperson said, without elaborating on comparative remuneration of ex-pats compared to PNG nationals.

Exxon Mobil PNG's LNG plant near Port Moresby

Exxon Mobil PNG's LNG plant near Port Moresby Photo: (C)2014 {Richard Dellman/AdvantagePNG}, all rights reserved

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.