"We declare our first goal to be for every person to be dynamically involved in the process of freeing himself or herself from every form of domination or oppression so that each man or woman will have the opportunity to develop as a whole person in relationship with others".

- Papua New Guinea National Goals and Directive Principles

Tuesday, 9 October 2012


 Steven Andre; 04/10/2012

It falls to me as a concerned Papua New Guinean to rewrite on one of the most pointed subjects in most of the PNG social media, the PNG LNG gospel.

The Hela men regard it as the fulfilment of a prophesy, every other Papua New Guinean hope for a better living standard through its proceeds, foreigners exploiting our weakness to milk,
it is the PNG LNG Project, the biggest PNG ever had.

It starts with the vesting of mineral resources in the State. The indigenous landowners are deemed to own the surface of the land and are entitled to royalties only. That is against our customary laws that recognise the ownership of a land as including subsoil resources. We have had experts like our very own Peter Donigi and Sydney based Robert Pritchard who’ve time and again reminded us that that notion is out-dated, yet we do not bother to review. As a result, the landowners have and are continuing to loose big time. 
The following are some of the information I have gathered (and I stand to be corrected by persons having ostensible authorities) on the PNG LNG Project and based on that I believe PNG will stand to miss out big time in this LNG.
1. We own the land and the LNG, yet the Project is developed by Exonn Mobil and its joint ventures. The Landowners have no say as most of the deals were done by the Government officials. The State’s right to ownership of subsoil mineral and petroleum resources deprives them of any standing to negotiate with potential developers concerning resources that are beneath their land.

2. By virtue of the Oil and Gas Act 1998, we have chosen to participate in the project with 19.2 % equity. I don’t understand this? How come we own the land, own the LNG and we have to pay to participate? What is the logic? Is it not possible to legislate for the automatic entitlement of equity without the participating capital [nonsense] by virtue of our ownership to the resources? We can keep the resources if the developers do not agree with our domestic laws and terms.

3. We did not have money for the equity participation so we borrowed $A1.68 billion from the Abu Dhabi Government’s International Petroleum Investment Company. It is understood that we have tied most of our state owned enterprises assets as collaterals and most of the fruits of the LNG harvest are expected to repay that loan. So PNG does not earn any profit until that loan is repaid in full with interest. Imagine how many other loans we are obtaining including the recent K6billion loan from Exim Bank of China. Bai Yumi kisim moni long we na bekim? LNG Tasol ya!

4. Owing to the incompetence of our negotiating team, the Abu Dhabi borrowing was done in Aussie Dollars, which had to be converted to US dollars, leading to another loss of $A300 million. The result of this financial incompetence is that the national government has had to borrow a further K900 million to ensure that Papua New Guinea can retain the level of equity that it wants in the LNG project. In big and complicated negotiations, our clumsy leaders should hire specialised experts to do our negotiation so that we get the best out of the deal which they failed.

5. It is understood that our nearsighted leaders have given the developers a tax holiday for 15 years. I also gather that the project agreement contract does not specify a cap on the barrels of LNG that can be extracted on a daily basis. I understand that four ships have been built to transport LNG to China. China had already signed an agreement with Exonn Mobil few years to sell the LNG. Knowing that a world renowned company like Exonn Mobil which has the capacity, is it not possible that it can extract everything (LNG) out within the tax holiday period?

6. Our Government even wanted to amend the Customs Act to exempt all imports of LNG Developers. Was the tax holiday not enough? Thanks to Garry Juffa and a few who stood against it.

7. Most of the major sub-contracts were given to foreign owned companies whilst we fight over the leftovers.

8. The Infrastructure Development Grants (IDGs) that our landowners have been fighting and were given were budgeted for by the Government. These were not LNG monies. It came from the taxpayers. So we are spending our own money to even look after the landowners? You don’t think so, do you?

9. Our small PNGean business people were anticipating some spin offs like leasing properties and so obtained loans left right centre to develop properties, only to be told just a year before production of LNG that most of the LNG workers would be accommodated on site? Looks like the banks are going to foreclose on those properties. What a disaster?

10. Many people claim that LNG is providing well rewarding jobs for Papua New Guineans. I see it as a brain-drain and will have a strain on the PNGs human resources. As a result, it will seriously diminish the competitiveness and effectiveness of other non-mineral sectors. Government is diverting too much attention into the LNG Projects. I’m afraid we may have contracted the “Dutch disease”.

11. Creating Sovereign Wealth Fund offshore sounds like a good idea. But who is going to manage it. Are those funds going to be safe after we’ve had experiences like the K100million MVIL Investment in the Woodland Capital Company?

12. Even if we gain some wealth from the LNG, how can we manage this wealth and translate them into long term socio economic development? Mismanagement and corruption have barrowed leakages in institutions of Government that seriously impede development. I don’t think we are prepared to manage the unprecedented wealth. Is it safe to say that it will destroy PNG?

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