Exxon's $19 Bln PNG Plant could change country's fortune

Posted by Joseph R. Fonseca
Tuesday, May 20, 2014
Image

ExxonMobil's $19 billion liquefied natural gas (LNG) project in Papua New Guinea, which is shipping its first cargo, is set to dramatically transform one of Asia-Pacific's most unstable countries, for better or for worse.

The LNG venture, which is expected to produce more than 9 trillion cubic feet of gas over 30 years, is the largest private investment in the South Pacific nation's history.

ExxonMobil is relying on projects like this one for much-needed production growth, while the Papua New Guinea government hopes it might double its $15 billion dollar economy, now slightly larger than Botswana's.

But sharing the spoils of resource projects has previously torn apart a country that is seen as one of the most corrupt in the world, and with a political system that produced two rival governments claiming to be in charge for much of 2012.

And as the first cargo of clean-burning LNG is shipped to Japan, the government has yet to fully identify which landowners will receive royalties, a critical holdup that has raised the spectre of unrest in the impoverished highlands where locals are anxiously awaiting a historic windfall.

The big question now is whether the project will prove to be a blessing or a curse, said Bryant Allen, an expert on Papua New Guinea at the Australian National University, who helped Exxon in identifying and compensating affected landowners there.

"If the Papua New Guinea government could find a way to get those funds to flow back into the education system and back into the health system and fix up all those schools, this could be fantastic for PNG," he said.

"But I just don't see it happening at the moment."

Other resource projects in Papua New Guinea have previously stirred violence or even civil conflict, and even when up and running there is a risk of money being squandered or pocketed by officials.

A copper mine once operated by Rio Tinto became a central issue in a bloody secessionist conflict in the semi-autonomous Bougainville region, while other projects have been blamed for environmental damage and human rights abuses.

DESPITE ALL THE POLITICAL NOISE

ExxonMobil's agreement with the government sets aside a 2 percent royalty for landowners, to be held in trust by the government until they have vetted the clans that claim to own the land.

Petroleum and Energy Minister Nixon Duban could not be reached for comment by phone or email, but he told the Australian Broadcasting Corporation earlier this month that he hoped most of the clan-vetting would be completed by Christmas.

The project contains unprecedented potential upside for Papua New Guinea. Its economy is forecast to hit a record 21 percent growth rate in 2015 on the back of the project, with the government expecting to bank 1.7 billion to 2.2 billion kina ($621 million to $803 million) per year until early next decade.

That figure will soar to 4.5 billion kina, boosting total revenue by 40 percent from 2014 before construction of a second $12 billion LNG project, expected to boost the economy further when work begins around 2017 or 2018.

ExxonMobil and its partners - Oil Search Ltd, Santos Ltd, Japan's Nippon Oil Corp and the PNG government - are looking to expand the plant, but have yet to decide where to source the additional gas.

ExxonMobil PNG Ltd Managing Director Peter Graham said that he has faith that the government would seize on the project's potential to radically transform Papua New Guinea.

"I am really proud of what we've contributed throughout four years of construction. We're ahead of schedule - and there aren't many resource projects in the region that can say that."

He said he was confident of the government's ability to distribute funds, adding that a transparent benefit sharing and distribution process was critical for long-term security.

RISK OF TROUBLE

Not everyone, however, is so sanguine about its prospects.

The highland valleys where the project is located are among the most isolated locales on Earth and deciding who is entitled to compensation is a hugely complicated task made more so by competing land claims and complex local concepts of ownership.

On top of this Papua New Guinea is ranked 144th out of 177 nations on Transparency International's 2013 Global Corruption Index, putting it just ahead of Zimbabwe.

"Right now there's an expectation that wealth will come. My point of view is that if people don't see something within 12 months of the startup, there will be big trouble," said Grant Worner, a former CEO of New Guinea Energy, an energy explorer.

The use of violence to settle disputes is also woven into the tribal fabric and assault weapons are ubiquitous.

The 700 km PNG LNG pipeline is mostly buried underground, though some experts warn of its vulnerability to sabotage.

In 2010 villagers attacked the plant site, burning heavy machinery and using high-powered weapons to damage construction equipment over a land dispute, according to a media report, and in March this year at least four people died in inter-tribal fighting in the highlands surrounding the gas fields.

"I've seen these guys in the bush and they can move through the bush at an amazing speed, so if they decided to take on their government because they were so cranky about it, it could be quite a nasty little war up there at some stage," Allen of the Australian National University said.

(Additional reporting by Sonali Paul in MELBOURNE and Aaron Sheldrick in TOYKO; Editing by Ed Davies)

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter May 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Contracts

Haven Marine Signs Service Contract with Svitzer

Haven Marine Services informs it has signed a five year contract with Svitzer which will see the yard service the requirements of Svitzer’s vessels within the Bristol Channel and Irish Sea areas.

Portugal PM Warns Lisbon Dock Workers to End Strike

Portugal's prime minister warned Lisbon dock workers on Friday that his patience was running out after a strike that has lasted a month, paralysing the city's ports.

Hercules Offshore Filing for Bankruptcy Again

Hercules Offshore Inc said it planned to file for prepackaged Chapter 11 bankruptcy, just six months after the rig contractor emerged from bankruptcy protection.

Legal

Portugal PM Warns Lisbon Dock Workers to End Strike

Portugal's prime minister warned Lisbon dock workers on Friday that his patience was running out after a strike that has lasted a month, paralysing the city's ports.

Gender Identity Spat Sinks Spending Bill

The rancorous political debate over sexual identity unexpectedly prompted the Republican-controlled House of Representatives to rejected an energy and water spending

Hercules Offshore Filing for Bankruptcy Again

Hercules Offshore Inc said it planned to file for prepackaged Chapter 11 bankruptcy, just six months after the rig contractor emerged from bankruptcy protection.

Finance

Defense Appropriations Bill Includes $1 Bln for US Icebreaker

The U.S. Senate Appropriations Committee’s FY2017 Defense Appropriations Bill has included $1 billion in funding to accelerate construction of a new polar icebreaker for the U.

Higher Capesize Demand Pushes up Baltic Index

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, rose on Friday buoyed by higher demand for capesize vessels.

TT Club Reports Robust Financial Results for 2015

TT Club has announced its financial results for the year ended December 31, 2015, and AM Best affirms its A- (Excellent) rating for the 10th consecutive year.   Knud Pontoppidan,

Energy

Hercules Offshore Filing for Bankruptcy Again

Hercules Offshore Inc said it planned to file for prepackaged Chapter 11 bankruptcy, just six months after the rig contractor emerged from bankruptcy protection.

Strike Idles 38 Oil Tankers at Fos-Lavera

Some 38 oil tankers have been held up at the Fos-Lavera oil port in southern France, the country's biggest, including 25 at harbour, up from 12 the previous day,

Höegh LNG Turns to Profit in 1Q

Höegh LNG returned to profit following a Profit after tax of USD 6.3 million for the first quarter of 2016, up from USD 4.0 million net loss in the fourth quarter 2015.

News

US Hospital Ship Aids South Korean Sailor

A U.S. hospital ship conducted a medical evacuation, or “medevac”, May 27 to assist an ailing Republic of Korea sailor aboard a Republic of Korea Navy (ROK-N) submarine.

Details El Faro's Sinking Emerge from US Probe

U.S. investigators on Friday concluded two weeks of hearings into the sinking of cargo ship El Faro in a hurricane last fall that included reports the vessel had

NASSCO Lays Keel for Jones Act Tanker Liberty

U.S. shipbuilder General Dynamics NASSCO hosted a keel laying ceremony on Thursday, May 26 for the Liberty, one of three new ECO Class Jones Act tankers under a

 
 
Maritime Contracts Maritime Security Naval Architecture Navigation Pipelines Pod Propulsion Port Authority Salvage Ship Electronics Sonar
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1483 sec (7 req/sec)