ExxonMobil's Natural Gas Project in PNG Fomenting Unrest

PORT MORESBY - The Papua New Guinea liquefied natural gas (LNG) project is the largest resource extraction project in the Asia-Pacific region.

Constructed at a stated cost of US$19 billion, it's operated by ExxonMobil in joint venture with Oil Search and four other partners.

The project extracts natural gas from the Papua New Guinea highlands, where it is processed before being sent via some 700 kilometres of pipeline to a plant near the nation's capital, Port Moresby. The gas is then liquefied and transferred into ships for sale offshore.

Construction for the project began in 2010, and the first gas shipment was made in May 2014.

In February 2009, the economic consulting firm Acil Tasman (now Acil Allen) produced a report for ExxonMobil about the project's impact. The purpose of the study, which was posted on ExxonMobil's website but has now been removed, was to provide an analysis of the likely impacts of the project on Papua New Guinea's economy.

ExxonMobil did not respond to questions about the removal of the report or the impact of the project on local communities.

The report said the project had the potential to transform the country's economy by boosting GDP and money from exports.

These would increase government revenue and provide royalty payments to landowners.

It claimed the project could potentially improve the quality of life of locals by providing services and enhancing productivity.

Workers and suppliers would reap rewards, as would landowners, who would also benefit from social and economic infrastructure.

But six years on, none of this has come to pass.

A shaky agreement

In the years since construction began, Papua New Guinea's ranking on the United Nations Development Program's Human Development Index has fallen by two places to 158, having been overtaken by Zimbabwe and Cameroon. Far from enhancing development indicators, the largest development project in PNG's history has coincided with an unprecedented downgrade in the country's development status.

In this period, there has been a stream of articles published that highlight the alarming state of Papua New Guinea's economy and criticise the lack of positive economic and development impacts from the LNG project.

But very little is known about the actual impact of the project on local landowners. This is largely due to the remote location of the gas field in the mountainous Hela Province. The dire security situation in that part of Papua New Guinea also makes any investigation a highly dangerous undertaking.

I first visited Hela Province in 2009 shortly before the project was to begin construction. I encountered a population that was bristling with anticipation and enthusiasm for a development that promised to transform their lives.

In 2016, I returned and spent seven months with the landowners of the LNG project as part of my doctoral research. What I encountered was abject poverty situated alongside one of the largest natural gas extraction operations in the world. Combined with this was immense frustration, anger, corruption, mounting violence and widespread proliferation of weapons.

Like other such projects in Papua New Guinea, the LNG project was able to begin operations after agreement was reached with landowners on the benefits that were to be delivered via the extraction and sale of the resource that exists beneath their land. After much negotiation, the PNG LNG Project Umbrella Benefits Sharing Agreement (UBSA) was signed in May 2009.

On its website, ExxonMobil describes the agreement as ensuring a "fair distribution of the benefits", but neither ExxonMobil, Oil Search nor any of the other joint venture partners are signatories to the UBSA. Rather, the agreement is between the Papua New Guinea state, various levels of government and the landowners themselves.

The agreement outlines a variety of income streams to be generated by the project, as well as specific development promises, such as road sealing and township development. Its upshot is that landowners can expect the LNG project to deliver tangible improvements to their lives and to the lives of their children.

But the reality — after four years of operation and windfall profits for the project's joint venture partners — is that the project has delivered almost nothing of benefit to landowners. In fact, it has, in important ways, made life worse for the majority of people living in the project area. (abc)