COURSE UNIT: CA124-PNG INFRASTRUCTURE
SEMESTER: 2 MAJOR RESEARCH
PAPER
“LNG and PNG Development in
the next 20 years.”
By: Reilly kanamon
LNG and PNG Development in the next 20 years |
Liquidified Natural Gas (LNG) has been produced more
than 65 years and has been safely delivered across the ocean for more than 50
years. It has become trade-able on the world market based on the fact that some
customers for natural gas are too far from gas sources for producers to supply
gas by pipe line.
LNG is an extremely cold, non-toxic, non-corrosive
substance (mostly methane) that is transferable and stored at atmospheric
pressure unlike other gases. The gas is transferable because it cools to
negetive161degree Celsius which reduces its volume. (Coffey National system,
2009).
PNG LNG is the first of its kind multi-billion
kina project incorporated with the PNG mining and petroleum sector. PNGLNG
project is spearheaded by the American based Exxon mobile company and other
partners such as Petromin PNG, Santos, Esso Highlands Limited and Oil Search
Limited. The project development includes gas production and processing
facilities in the Southern Highlands and Western
Provinces of Papua New Guinea, including liquefaction and
storage facilities (located northwest of Port Moresby
on the Gulf of Papua) with capacity of 6.6
million tons per year. Also there are over 700 kilometres of pipelines connecting
the facilities.
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| Artist impression of the facility taken from www.pnglng.com |
Amazingly
the investment for the project set up is estimated at US$15 billion over the 30
years life of the project with an expectation of over nine trillion cubic feet
of gas that will be produced and sold to four major LNG customers in the Asia
region .These customers include Chinese Petroleum Corporation, Taiwan; Osaka
Gas Company Limited; The Tokyo Electric Power Company Inc.; and Unipec Asia
Company Limited, a subsidiary of China Petroleum and Chemical Corporation
(Sinopec). (Esso Highlands Limited, 2010)
At the say of a multi-billion Kina project
indigenous Papua New Guineans have their own emerging picture of PNG in the
next twenty years. Many people see in their mind's eye the famous city of Dubai as a model for PNG
in the near future. However much is yet to be unveiling as soon as the project
goes into full production stream for the next 30 years.
This
paper provides the analysis of the short and long term development from the
project and compares the PNGLNG project with current and previous mining and
petroleum trends in PNG.
Short and Long Term
Development
Development
has becoming a daily vocabulary from among the elites to the most marginalized
villagers however short and long
term development is seen from different lenses. Sullivan (2007) stated that the
marginalized Papua New Guineans regard development in terms of new roads,
houses, money and so forth whilst the elites define long term development in
terms of economic growth and sustainable investment.
With
these differences the PNGLNG project has structured its development strategies to
meet both the demands of the marginalize land owners and the government. (Esso
Highlands Limited, 2010) The short and long term development provided by the
project includes direct benefits such as employment, direct cash flow to the
government and landowners in the form of taxes, royalties and development
levies. Also capital investment such as schools and hospitals are taken care of
in the project planning. (Tasman,
2009)
This is an indication that the investors
are critical about the way Papua New Guineans conduct their daily business.
 |
| Nationals Employed by the LNG |
PNG
LNG first quarterly environment and social report (2011) publishes many new
approaches the project has taken for service and development in the country.
Some of these initiatives include twenty-four health education scholarships to
Southern Highlands, Gulf and Central students in Divine word University and
22,500 school packs to more than 22,500 elementary students in the PIA.
The
long term development provided by the project includes human development in
terms of quality skills required in the mining and petroleum sector in the
country. PNGLNG has invested K150 million to up grade Port Moresby technical
school and Juni construction training facility at the project site to cater for
850 students annually for four years as part of building work force. Also local
firms had the privileges as suppliers of goods and services to the project’s
construction phases. In the project first quarter report more than K475 million
was spent on PNG cargo and services. (PNG LNG first quarterly environment and
social report (2011). This encourages local firm to contribute meaningfully to
the national economy. Turuhe, (2009) argues that the more money is circulating
in the national economy, the country has the capability to expand its
infrastructure despite the rising world prices of imported goods and services
because it has the buying power. Kuyei, (2010) stated in an equation that more
real terms or money circulation in an economy = increase in production
activities = high GDP = high living standard =development. This equation
summarizes all economic activity in a state. Therefore with huge cash flowing
in the economy by the PNGLNG project indicates that the country is more likely
to have a stable economy and potential infrastructure development in the next
twenty years.
LNG and mining
and petroleum in PNG
(comparison ideas)
PNG
LNG is the biggest ever project compared to all mining and petroleum projects
that Papua New Guinea has ever had. (Sullivan, 2007) However the most asked question remains unanswerable. Will the PNGLNG
project bring sustainable development in the next 20 years? Much that has been
experienced from the many mining projects operating and had operated in the
past indicating that Papua
New Guinea is not adequately equipped for
the multi-billion kina project because of its unstable mining and petroleum
policies (Imbun & McGavin, 2001).
Imbun
and McGavin (2001) stated that the closure of the Bougainville Panguna copper
mine was due to PNG ceasing to have a single policy regime for the mine. They
also argued that Papua New Guinea had
some of the world’s standard mine such as the OK Tedi, Pogera, Missima, Ramu
cobalt and Lihir operating for many years. However the economy of the country
had been unstable. These experiences indicate that the PNGLNG project is much
more complicated for the developing economy to manage.
With the rise of the mining and petroleum
sector in the post-independence, PNG has stood out in corruption and
misappropriation of funds both in public and private sectors compared to its
neighbouring pacific islands countries. According to a corruption perceptive
survey carried out by the Transparency International PNG (TIPNG) in 2008, PNG
was ranked 150 out of 180 countries.
(Taule, 2009)With the current trend of unstable governance and corruption the billions of kina in the hands of land owners, employers and the government could vanish after the 30 years of the PNGLNG project just like the Bougainville Panguna mine closure. The picture is that even though revenue from previous and existing mining, petroleum and forestry had been increasing, PNG faces five consecutive years of large deficit. (ANUTECH, 1995). Some people may argue that the five years of deficit was the fault of past political leadership but it will not be applicable today. However Kavanamur, Yala & Clement, (2003) pointed out that the country’s Bureaucrats and politicians are caught in tension between greed and materialism.
 |
| LNG Plant site from www.Google.com |
(Taule, 2009)With the current trend of unstable governance and corruption the billions of kina in the hands of land owners, employers and the government could vanish after the 30 years of the PNGLNG project just like the Bougainville Panguna mine closure. The picture is that even though revenue from previous and existing mining, petroleum and forestry had been increasing, PNG faces five consecutive years of large deficit. (ANUTECH, 1995). Some people may argue that the five years of deficit was the fault of past political leadership but it will not be applicable today. However Kavanamur, Yala & Clement, (2003) pointed out that the country’s Bureaucrats and politicians are caught in tension between greed and materialism.
They
also argued that PNG has deteriorate so much in recent time that critics have
compared it to a sinking ship caught in the sea of corruption, economic chaos,
political turmoil and social inferno. Therefore the PNGLNG project will not
only facilitate development but more burdens to the people of Papua New Guinea.
Recent feedback from investors in the multi- billion kina project to agreement
with the government had shown that both parties are not satisfied as yet .On
the other hand investors could easily prey of the weak petroleum policies given
that the PNGLNG wells are found at various areas in the southern region with
huge profit potential. (Inter Oil did not comply with requirements, 2011)
Another
factor that has hindered past mining and petroleum sector in Papua New Guinea
in the past decades was the land owner issues on royalties. Due to the land
tenure system that PNG has, the government had been struggling but to no
success in addressing landowner queries on benefit sharing from projects
operating on their land. Now that the PNGLNG project is on its way, the media
is flooded with rising issues from new land ownership groups forming every day.
In
the Papua New Guinea Post Courier (Ekanda: LNG deals flawed, 2011), Tuguba
leader Simon Ekanda argued that numerous court proceedings including the legality of the PNGLNG
agreement on May 22,2008 had been left unattended. “We will not give up until
we correct the government’s mistakes so that this cannot be set as a
precedent”, Ekanda said. Given such a scenario the future of the PNGLNG project
would possibly be a tug of war between the state and land owners with the
investor as the referee.
Like
the Panguna mine which led to the Bougainville crises in the late 1960s the
PNGLNG is vulnerable to a much outrageous crisis than ever if land owner issues
keep arising. The Panguna mine before the crisis account for 40% of Papua New
Guineas export between seventeen and twenty percent of the government revenue.
However landowners’ realised the destruction caused by the mine and storms the
mine site. (McManus, 2011)
The
PNGLNG project itself has more land owner involvement than any other mining and
petroleum in PNG because it has pipe lines that run through three provinces
starting from southern Highlands and extending to central province via Gulf
province. (Tasman, 2009)
With
the vast employment opportunities that the PNGLNG project will create comes the
impacts on other economic sector in the economy. By 2014 most skilled workers
in other petroleum and mining project would possible seek employment with the
project because of it pay package and production in the other sector would
probably diminished. (PNG LNG first quarterly environment and social report,
2011)
Like
the Panguna mine that draws many skilled workers to the project, the PNGLNG is
no acceptation. The agriculture, logging and senior public servants in
government officers left for the Panguna mine because of better pay package.
Therefore the economy of PNG was highly dependant on mining. With the closure
of the mine, the economy was highly affected as every focus by then was on
mining and not agriculture and forestry and so forth. (Sullivan, 2007)
Kwan,
(2001) argued that firms that are committed to the transfer of skills to local
people have also bad impacts. These trained local workers if laid off from work
may not easily absolve in other sectors. For example, at the closure of the
Panguna mine many workers were jobless. Therefore after the 30 years life span
of the operation of the PNG LNG project, where will all the current employees
find jobs? By then other production sectors in the economy would have had
employed enough workers. (Kuias, 2011)
Conclusion
In a short time frame the LNG project had
invested more into PNG’s economy than any other petroleum and mining projects
that had existed and operated for many years .It can be said that in the next
twenty years the economy will be better off in terms of development. This could
mean better health services, education and infrastructure. The delivery of
these developments now lies entirely on the country’s political leadership from
politicians and Bureaucrats serving in the Public Offices. Their performance
could either encourage sustainable development or worsen the economy into the
poverty drain.
Therefore the government of the day
should make standard mining and petroleum policies, be transparent with their
dealing in this sector of the economy and promote true integrity system within
all public offices purposed to serve the common interest of the people of Papua
New Guinea in terms of human and infrastructural development.
Reference list:
Australia National University
of Technology, (1995).Impact of mineral
exploitation on PNG economy.[Research journal.] Coffey National system. (2009). PNG LNG project impact statement. Executive summary, v.1 Ekanda:
LNG deals flawed (2011, September 26).Papua
New Guinea Post Courier, p.12. Esso
Highlands Limited, (2010). PNG LNG
project .Retrieve on September 15, 2011 from; www.pnglng.com
Hualupmomi, F (2011). Protecting LNG in a contestable world.
Retrieve, April 15, 2011 from: http://pnglng.com/media/pdfs/publications/acil_tasman_impact_study_revision_01.pdf
Imbun,
B.Y & McGavin, P.A. (2001). Mining in
Papua New Guinea: Analysis and policy implication. Port Moresby: University
of Papua New Guinea.
Inter Oil did not comply with
requirements (2011, September 27).Papua New
Guinea Post Courier, p.2.
Kavanamur, D, Yala, C & Clement, Q.
(2003) .Building a nation in Papua New
Guinea; Views of the
post-independence generation. Canberra: pandanus books. Kuais,
G (2011).Public Administration; The
private and public enterprise. [Tutorials] Kuyei,
M. (2010). Circular flow of income
[tutorial]. Manus secondary
School.
Kwan,
E (2001).Resource law in Papua New Guinea;
The importance of non-renewable resources. Law book cooperation, Sydney. McManus.
(2011).Bougainville crises; Moodle
notes for CA125: PNG history. PNG
LNG first quarterly environment and social report. (2011, July 27) .Papua New
Guinea Post courier. PNGLNG
News letter 5: Stories from the field.
(2 011, September 12).Papua New
Guinea Post Courier insert.
POSMAN, K (2010) .PNGLNG and the law
[Awareness speeches] Bundrou: Manus island.(Posman is the owner of Posman kua asi law firm that is involved in the negotiation of the
project) Sullivan,
N. (2007). Papua New Guinea’s prospect
for sustainable development. Madang: DWU press. Taule,
E. (2009). Fight against corruption.
[Power point presentation]. Transparency international youth democracy conference.
Goroka.
Togolo, M. (2004) .The ‘Resource Curse’ and Governance: A Papua New Guinean
perspective. Retrieve on September 15, 2011; from http://epress.anu.edu.au/ssgm/global_gov/mobile_devices/ch14.html Turuhe,
F. (2009).Macroeconomics [tutorial].
Manus: Manus secondary school.
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