ABC Asia Pacific - PNG Minister appeals for calm over LNG payments

Papua New Guinea's Minister for Labour and Industrial Relations, Mark Maipakai has appealed to disgruntled landowners of the multi-billion-kina liquefied natural gas (LNG) project not to take the law into their own hands over delays in payments.

"There are proper processes and procedures to follow, and threatening the government and the developers is not the way forward," he said.

Maipakai said landowners should think about the long-term benefits of the project and not invite police to use force on them.

He said police manpower at the project sites was intact and additional assistance would be given if there was a need.

Three police mobile units, comprising about 100 men, were at the LNG sites.

He urged landowners issuing threats to approach the issue as matured adults because their actions now would affect the future of their children and grandchildren.

Mr Maipakai, however, could not say whether there were strategies in place to curb any escalating lawlessness.

Understanding the Class Dynamics of Agrarian Change - A New Volume by Henry Bernstein

Henry Bernstein, Professor of Development Studies at the University of London, has recently published a book which examines the class dynamics of agrarian change. Given that the PNG LNG project will inject enormous amounts of capital into the Southern Highlands region and beyond, understanding the impact this will have on agrarian change in the region is essential.

The first chapter of Bernstein's monograph is provided below:

http://www.fernwoodpublishing.ca/website_pdfs/classdynamics.pdf

It is well worth a read over the Christmas break.

Happy Xmas from LNG WATCH!

Penetrating Exxon's Spin: An Annotated Speech from the Sydney Investment Forum

Peter Graham, the Managing Director of Esso Highlands( Exxon Mobil’s Papua New Guinea subsidiary) recently updated the investment community on the progress of the PNG LNG project. In an effort to convince the investor community that the LNG project is as ‘safe as houses’ (sic), Graham has filtered his speech through a rather rosy colored lens. To negate the effect of Graham’s filter, LNG WATCH provide below an edited version of Graham’s speech, which is annotated with links to relevant LNG WATCH articles that suggest the situation is considerably more complex in the Southern Highlands than what Esso Highland’s Managing Director indicates.  

PNG Investment Conference Sydney Dec 7

 “The PNG LNG Project: Business Development Update”

Peter Graham

Honorable Ministers, Distinguished Guests, Ladies and Gentlemen; Good Afternoon

It is a pleasure to be here today to talk about the progress we are making on Business Development associated with the PNG LNG Project and the importance of this Project and associated business to the economic future of PNG.

The recent PNG budget predicts real GDP growth to be over 8% in 2011, reflecting the impacts of the PNG LNG Project ramp up. Clearly the budget is framed against a backdrop of strong domestic economic growth as a result of the project.

http://lngwatchpng.blogspot.com/2010/10/riches-may-not-help-papua-new-guinea.html

http://lngwatchpng.blogspot.com/2010/10/bell-tolls-for-papua-new-guinea-looting.html

…

As Decie Autin explained yesterday, our construction activities are currently focused on improving and upgrading infrastructure, including road and bridge works, telecommunications, and constructing camps to house the construction workforce and completing site preparation work ahead of facilities construction.

Detailed engineering, execution planning and procurement activities for the facilities, pipelines and drilling are also progressing.

Linepipe for the onshore gas line from the Gulf of Papua to the Southern Highlands is arriving at the expanded shore base at Kopi and clearing of the pipeline right-of-way has commenced.  Trenching and pipe laying will commence in the first quarter of 2011.

Earthworks at Komo Airfield and the site of the future Hides Gas Conditioning Plant have commenced.

At the LNG Plant site, an 800-person pioneer camp is complete and site preparation for the LNG Plant is well underway.

http://lngwatchpng.blogspot.com/2010/10/exxonmobil-and-mcjv-are-bulldozing.html

…

ExxonMobil has over a century of success in helping countries around the world to develop their resources.  Esso Highlands Limited, the project operator, is a subsidiary of Exxon Mobil Corporation, the world’s largest publicly traded international oil and gas company.

http://lngwatchpng.blogspot.com/2010/10/exxon-mobil-papua-new-guineas-new.html

http://lngwatchpng.blogspot.com/2010/10/exxon-mobile-around-world-nigerian.html

Exxon Mobil has long been recognized as a leader in the oil and gas industry. The secret to the company’s success is, in fact, no secret at all. It involves maintaining the same steadfast commitment to the business principles – those sound fundamentals – that have proven successful over our 125 year history.

This business approach includes effective long-term risk management, disciplined capital investment, enduring business controls, and an unwavering commitment to safe and reliable operations.

We believe that this commitment to high ethical standards and business integrity and the importance of making a positive change in our communities is critical to our competitive advantage and it's a standard we expect from our business partners.

…

Through the PNG LNG project we are now very much a part of the PNG community and we are working hard to ensure we remain a valued member of the communities within which we operate. 

http://lngwatchpng.blogspot.com/2010/11/from-court-challenges-to-airport.html

…

In project areas much of our service requirements is met by Landowner Companies – called Lancos.  These companies, common throughout the resource industries in PNG, are typically owned by landowners within the vicinity of the work site being serviced.  They provide local employment in areas such as labor, camp management, security and ground transportation and when successful pay dividends to their shareholders.  Lancos also often assume a social responsibility within their local communities, contributing during times of need.

Esso Highlands Limited’s objective in local business development is to provide opportunities for Project Area landowners by supporting the development of capable, nationally competitive service companies that remain operational long after Project construction is completed.

...

In April 2010, we opened a supplier resource center, the “Enterprise Center” in temporary premises at the well known Papua New Guinea Institute of Bankers and Business Management in Port Moresby. It’s expected to move into a permanent facility on the same site soon.

The Enterprise Center is an independent organization set up to support local businesses, including Lancos, to develop business opportunities and promote sustainability by facilitating communication between project stakeholders, including contractors, subcontractors and domestic PNG businesses.

It is also building capacity of some Papua New Guinean businesses to meet the Project’s business standards.

http://lngwatchpng.blogspot.com/2010/10/landowner-groups-and-derelict-state.html

…

The PNG LNG Project needs a large construction workforce, as well as a highly trained workforce to operate and manage the facilities once built. Businesses need skilled people and we are adding to the pool of qualified Papua New Guineans. 

On Nov 30 we officially opened our new trade training facility at the Port Moresby Technical College. This represents a significant investment in PNG's future.

This centre will provide training to construction workers for the LNG Plant site, and along with a smaller facility we are building at Juni in the Highlands for the Hides Gas Conditioning Plant, will together train about 1,000 people per year, both men & women.

…

In May 2009 government representatives and landowners demonstrated a landmark commitment to resource development democracy when they reached agreement on how the benefits from the Project will be distributed.

I'd like to congratulate the national and provincial governments for the way in which they have risen to the challenge of supporting the Project.

The Government has launched its medium term development strategy and building workforce and supplier capability in PNG is a key for successful realization of this vision.  Substantial funds have been committed to infrastructure projects. The expectation is that Papua New Guinean companies, including companies that have honed their skills and capabilities in working with the PNG LNG project, will play a significant role in executing these projects.   As construction work on the Projects phases down, opportunities in the public sector are expected to develop for PNG companies that have demonstrated sound business fundamentals and an ability to compete.

Beyond the construction phase of the PNG LNG Project, revenues from the project will flow to the State and into various investment funds, including an infrastructure fund.

http://www.actnowpng.org/campaigns/stop-the-stealing

…

Returning to the theme of my talk - the importance of “sound business fundamentals” - the PNG LNG Project offers an opportunity to raise the bar; to build capacity in the Papua New Guinea workforce and to build capacity in Papua New Guinea businesses to successfully compete.

A safe and secure work environment is a realistic expectation when communities are engaged – engaged in vocational training, engaged in work, and engaged in businesses that support the project and other ventures. 

http://lngwatchpng.blogspot.com/2010/10/when-persuasion-fails-exxon-mobil.html

Our record project finance agreement in March this year represents a huge vote of confidence in the project, in our ability to deliver as operator working with our joint-venture partners, and it represents a huge vote of confidence in the PNG Government, and the people of Papua New Guinea.

While this was an historic milestone, it was only the beginning.

International gas customers, shareholders and lending institutions have shown confidence in our abilities and potential. Now we recognize that it's up to all of us to deliver – and we know that the world is watching.

Thank you.

Homes Razed for ‘Development’

The National 20 December 2010

GOILALA MP Mathew Poia has called on authorities to monitor the impact of the LNG project on ordinary people living in the NCD and Central.

He said last Thursday after receiving complaints from Goilala people who had been long time settlers around Laloki River and 9-Mile quarry near the Hiritano Highway.

Poia said his people were being forced to vacate their houses and the land that they developed over 40 years.

“I am calling on the Lands Department and other appropriate authorities to ensure that proper procedures are followed by newcomers who are literally bulldozing many settlers who had lived and developed land in these areas,” he said.

He said that a lot of under-the-table deals were taking place in offices and new developers were coming in and doing things with no regard for the people who had been living in and improving these areas for years.

“The Goilala people living along 9-Mile quarry and Laloki River are the original settlers and if they have to be forced out, then they must be informed in advance and compensated for the improvements they have made on the land,” Poia said.

He said that while oil and gas developments as in the LNG project were welcomed, the small people should not be ill treated in the name of development.

Early last week, a bulldozer and a work gang, accompanied by police, moved on to a roadside area occupied by seven Goilala families and destroyed their homes, gardens and trees.

Police told Poia, who visited the families last Thursday morning, that they were acting on a court order to evict the settlers. And that order was taken out by a company Maku Ltd claiming the land described as portion 2659Ctj.

Poia said, after checks with the Lands  and Physical Planning Department later that day, he decided he would appeal against the National Lands Board decision to grant the lease to Maku Ltd seven months ago.

Dependency theory or why the world’s poor remain poor

LNG WATCH PNG: Dependency theory attempts to explain why under capitalism it is virtually impossible for the developing world to close the global inequality gap. One conclusion forwarded is that this inequality is built into the basic structures of the capitalist economy, thus any resolution of this state of affairs requires a determined revolutionary effort from below. While dependency theory has been subjected to substantial critique, modern reformulations – see below – offer a nuanced analysis of the global political economy relevant to countries such as Papua New Guinea.  The following article offers a brief formulation of dependency theory, which is drawn from Development After Globalization: Theory and Practice for the Embattled South in a New Imperial Age by John Saul.

Dependency

By John Saul and Colin Leys

Dependency refers to the way in which the “South” was subordinated to the needs and requirements of the “North” during the latter’s capitalist revolution, especially through colonialism, and to the severe price the South continues to pay for the legacy of this today … At the heart of dependency approach is the view that ‘developing’ countries are not just “behind” the economically advanced countries but remain subordinated to them by various mechanisms that must be abolished by radical change from below ...

The continuing relevance of the concept of dependency lies above all in the analyses it produced of the impact of imperialism, past and present, on the former colonies. Their economic structure tend to reflect the original reason for making them colonies: the production of primary commodities for export, and the creation of an infrastructure of railways, roads, ports and telecommunications oriented to exports, not the promotion of an integrated national economic offering viable internal markets for more than basic goods.

The well-known decline in the terms of trade for developing countries is closely related to the unbalanced nature of their economies … the decline in the terms of trade contributed significantly to growing indebtedness, which eventually obliged so  many countries to accept the ‘structural ‘adjustment’ programmes imposed as  a condition of further aid by the IMF and the World Bank. Not only was this a new form of dependency, but structural adjustment also tended to reinforce many of the features of these countries’ economies – especially their reliance on a few commodity exports – which were at the root of their economic difficulties.

Economic dependency is also reflected in the social structure. Primary commodity production in the colonial era was based on family labour on independent smallholdings, or on very low-wage labour on foreign-owned estates or mines. The typical result is, one the one hand, a large, poor and poorly-educated majority, still engaged in relatively low-skill work or, increasingly crowding into cities with unemployment rates of up to 80 per cent, and still heavily dependent on domestic substance production by relatives in the countryside; and on the other, a small local professional and business elite, deriving its income from state revenues or from the intermediately tasks they perform for foreign firms and agencies.

This kind of social structure in turn accounts for the well known political weakness of so many countries in the south. Urban elites dominate political life, and the ‘civil society’ institutions that are taken for granted in industrialized countries (such as trade unions, business associations, craft associations, nation-wide churches and national newspapers, not to mention democratic parties) , and which in various ways make the elites more accountable to the popular majority, are often weak or even, in some cases, absent. Especially in periods of economic retrogression … people fall back on local and ethnic attachments, making national politics of any kind, let alone democratic politics, extremely difficulty …

Papua New Guinea's Faustian Pact with the US - Part II

On November 5, LNGWATCH brought attention to the Faustian pact the Papua New Guinea government was entering into with the United States (see http://lngwatchpng.blogspot.com/2010/11/goethe-in-papua-new-guinea-somares.html). Sure enough evidence is now arising demonstrating quite concretely how the US government is using its influence to shape conditions in PNG to suit the economic interests of its natural resource operators.

Vitter slams Interior Department for sending staff to Papua New Guinea

By Andrew Restuccia - 12/15/10 05:41 PM ET

http://thehill.com/blogs/e2-wire/677-e2-wire/133913-vitter-slams-interior-department-for-sending-staff-to-papua-new-guinea

Sen. David Vitter (R-La.) slammed the [US] Interior Department's offshore drilling agency on Wednesday for sending staff to Papua New Guinea to advise officials there on the best way to develop the country's offshore drilling infrastructure.

In a floor speech Wednesday, Vitter said the department should not be using its resources to send staff to Papua New Guinea when it has been struggling to approve offshore drilling permits in the United States.

"I find it outrageous that the same Interior Department that can't get a single exploration plan or deepwater drilling permit out the door apparently has the resources to send staff to a three-day workshop halfway around the world in Papua New Guinea to discuss offshore permitting," he said. "After months of foot-dragging and repeated claims that it needs more money to hire more staff to dedicate to offshore permitting, Interior's choice to allocate funds to the government of Papua New Guinea is a disgrace to the people of the Gulf Coast."

Staffers from the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) attended the technical assistance workshop, which was organized by the State Department.

"BOEMRE welcomes this opportunity to share our knowledge and experience with the government of Papua New Guinea," BOEMRE Director Michael Bromwich said in a statement about the trip.

BOEMRE spokeswoman Melissa Schwartz said Wednesday the staffers sent to Papua New Guinea were not involved in approving offshore drilling permits. "No BOEMRE appropriated funds were utilized for this travel for the four staff members who participated (none of which directly approve permits). Funds came from the Department of State via the U.S. Agency for International Development," she said in an e-mail to The Hill.

A Thoughtful Piece from Act Now

Thorough study needed on impacts of LNG

By Prof Jason Nakandaul Herra

PNG is ill-prepared for the impact of liquefied natural gas (LNG).

So far, we have watched the progress from gas agreement in May 2008 to financial closure on March 11 with little more than fascination.

We heard the talk of the project, about the enormous wealth creation and its potential to change our fortunes but thought little of how it might impact us individually or as a community.

Partly, this has been because there has been little to work on it. Nobody has given us any clue on the full cost and benefit of this project.

The blame must be placed squarely at the doorstep of the executive government and parliament.

While there has been a ministerial economic committee formed for the express purpose of the LNG project, its sole purpose, so it would seem, has been to speed up the approval of the project.

Little has been done by way of preparing the nation for the effect which will have a tsunami-like consequence upon our fragile social structure and small economy.

So much has been said about what the multi-billion kina project might bring but so little is said about where this money is going to be spent on or what kind of impact so much money will have on PNG.

So much money is not necessarily a good thing. As we have seen since the advent of the Bougainville copper agreement in 1974, and every other copper, gold and oil agreement since.
All the billions of kina from those projects seem to have vapourised into thin air.

Australia has spent nearly K20 billion since independence in budget support but there is nothing to show for those billions.

PNG enjoyed windfall money from good commodity prices of some K6 billion in the last six years.

This money has disappeared and the Highlands Highway still in dire need of maintenance, with hospitals still running short of essential medicine, with nurses, doctors and other civil servants still waiting for their awards and with the rural outback still in need of essential services.

So, a lot of money is not a good thing if the government does not have a plan on where the money ought to be spent.

Exxon-Mobil is the world’s No.1 in the oil and gas business.It will drive this project in as responsible a manner as is commensurate with its reputation.

But Exxon cannot be expected to fulfil the statutory and constitutional functions of the state.
That is the state’s responsibility and we have not seen this plan as the project progresses to construction phase.

The executive government seems to have conducted itself more as a project beneficiary than as the neutral state negotiating on behalf of the people with the project developers. In that sense, it has compromised itself.

It now falls on parliament to conduct a study of the full import and impact of the LNG project for and on behalf of the people.

Relevant parliamentary committees relating to the economy, security and infrastructure should conduct a joint meeting and propose a joint inquiry which will look at how the project will affect the entire nation across the entire social, economic and infrastructure sectors.

The LNG project will affect this country in a very substantial way, whether we like it or not. As we have heard in the Asian riots inquiry, there are some 14,000 applications for work permits alone from the LNG project and only nine persons to process them.

Word is that when the project goes into full construction stage, there will be a need to process 50,000 visas and, as we have also learnt, there is little capacity in Immigrations to process that kind of workload.

The economic costs will also increase because the state will need to match or surpass LNG salaries to keep its workforce. And that is only one area of  concern.

In the absence of any cost-benefit analysis by the government, PNG does not know the full import of the LNG project.

This is not an academic exercise.

It is a crucial task that parliament must establish immediately with an urgent inquiry with sufficient funding for the engagement of professional socio-economic analysts to study the LNG’s impact on every industry, every sector and every region of the country.