PNG gets a dose of resource curse as LNG project foments unrest
by MICHAEL MAIN | The Conversation - Extracted from Keith Jackson - PNG Attitude blog
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.
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.
During my fieldwork with project area landowners, I saw a life of immense frustration, disappointment and palpable anger at the absence of benefits. The township of Komo, which is at the centre of operations, contained a newly built hospital that stood empty with no beds, no staff and no fuel for its generator.
It, and its newly constructed staff houses for non-existent staff, are just two of several white elephants built at inflated prices by companies owned by Papua New Guinea's politicians. Promised road sealing and township development, including power supply and schools, have all failed to materialise.
The most terrifying aspect of life in Hela province has been the proliferation of weapons. The Huli-speaking population comprises a complex society of hundreds of individual clans with a history of disputes over land and possessions that can be traced back over many generations.
This pre-existing context of intense inter-clan rivalry has been made worse by the frustrations of a population hammered by the broken promises of the nation's largest resource development project.
During the project's construction phase, Komo was a hive of activity. It was home to thousands of international workers as well as PNG nationals attracted to high-paying jobs and the promise of an LNG-driven future.
Large amounts of cash were paid to people who had no prior experience of money, and the lack of infrastructure development meant there was little to spend it on other than consumable goods and guns.
A black market arms trade has existed between the PNG highlands and the Indonesian military across the border in West Papua for many years. During the course of my fieldwork, I witnessed constant outbreaks of fighting by heavily armed clans, young men gunned down by military assault rifles, and many dozens of houses shot through with holes and razed to the ground.
Much of this fighting is a direct result of payments made to landowners displaced by the project. Compensation money paid to affected clans invariably ends up in the hands of individuals who fail to distribute the funds properly or support their own families, and the money is always paid to men.
In 2009, ExxonMobil agreed to pay K700 (approximately US$216) per hectare per year for land occupied by the LNG project, indexed to inflation. The giant Komo airfield that was built to fly in materials for the project's construction occupies an area of approximately 1,500 hectares. Disputes over ownership of that land have resulted in sporadic warfare over the past several years and dozens of deaths.
In August 2016, several leaders of landowning clans at ExxonMobil's gas conditioning plant at the village of Hides, which is located on a ridge in a remote part of Hela Province, organised to blockade the facility and shut off the gas taps at several wells.
Although security guards initially opposed the blockade, the landowners came armed. They forced their way into the plant site before locking its gates and demanding that the government meet their ultimatum to honour the UBSA agreement.
Members of Papua New Guinea's mobile police squad told me they had no intention of acting against the local population, who vastly outnumber and outgun any police and military presence the government is capable of providing.
When I interviewed the landowner leaders during the blockade, it became clear that what they were demanding amounted to a better future for their families.
In November 2016, a convoy carrying the Hela Provincial governor, deputy governor and some local level government councillors was blocked on the road by an armed clan. Although the dispute was clan-related, I was informed that the convoy was targeted as a result of frustration over the lack of LNG project benefits and perceived corruption.
The resulting shootout left two people dead and one policeman wounded. A few weeks later, the PNG Government announced that it would be sending troops with "logistical support" from ExxonMobil and Oil Search into Hela province, to flush out illegal arms and restore peace to that volatile part of the country.
The military intervention in Hela province has thus far been unsuccessful. James Komengi, a Huli who runs a peace NGO based in Hela province, told me that a gun amnesty that's been in place for the past two months has failed to recover anything other than a few home-made shotguns and some non-serviceable factory-made rifles.
Residents of Komo village are reporting that ExxonMobil staff are being transported under heavily armed guard from their arrival at the Komo airfield to the gas conditioning facility at Hides. Recently, a man was gunned down at the Komo market in full view of the police and military contingent that is tasked with ridding the local population of its weapons.
According to the blog Papua New Guinea Mine Watch, these forces stood by and watched the killers as they calmly left the scene. They said that they were human beings who were fearful of losing their lives in the face of the enormous task ahead of them.
The governor of Hela Province has now declared the gun amnesty to be unsuccessful, with few weapons being surrendered.
The next stage is for the police and army to attempt to forcibly remove thousands of military weapons from hundreds of clans throughout the province. All this is a far cry from the excitement and optimism that characterized the mood of the landowners when the LNG project began construction in 2010.
Papua New Guinea now faces a situation where it's compelled to send its army to an area where a major resource extraction project has failed to deliver on its promises to landowners. It may be time for all parties involved — both state and corporate — to consider development as a more effective path to peace.
Michael Main is a doctoral student at the Australian National University.
Comment by Chris Overland on PNG Attitude blog
As someone who lived and worked, albeit briefly, in the former Southern Highlands, this article makes for depressing but not very surprising reading.