A PARADOX OF PLENTY? WHAT LNG DEVELOPMENT COULD MEAN FOR SECURITY IN PNG!

WITH the announcement on 17 May that Papua New Guinea is in its eleventh successive year of economic growth, of which the US$ 15 billion ExxonMobil-led Papua New Guinea (PNG) LNG project is a major contributing factor, questions regarding the wider security implications of the project must be asked. These questions are compounded by an increase in attacks and demonstrations in the country and supported by the controversy surrounding Prime Minister Sir Michael Somare, who was found guilty of 13 charges of financial misconduct in late March.

 

LNG in PNG

The LNG is an integrated development that includes gas production and processing facilities as well as over 700 km of pipelines connecting facilities across the country.  It will provide a long-term supply of LNG to the Chinese Petroleum Corporation in Taiwan, the Osaka Gas Company Limited, The Tokyo Electric Power Company Inc., and Unipec Asia Company of China. There is little doubt that the LNG project will have a major transformative effect on PNG and the wider regional energy finance market.

 

Security-related impacts

Through a boost in GDP and export earnings, an increase in government revenue, royalty payments to landowners, a surge in employment opportunities and a means towards accessing other gas-based industry development, the LNG project has transformed the economic environment of PNG in the long-term. However, the risk that tribal conflict will disrupt preparations for the LNG project in the Southern Highlands in the short-term remains ever present, and will increasingly intensify as the project continues.

 

There is evidence of amplified unrest in PNG as rival groups seek capitalize on the increased capital flowing into the country. Attacks on the facilities directly linked with the LNG project are likely over the period of construction as clans try to use force to extract concessions or, more likely, fight with rival groups over what has already been allocated in terms of royalties. Foreign workers should expect to be increasingly targeted as the LNG project continues to widen fissures within society and between tribes. Increased criminality the short and medium term is also likely. Further disruptions to the projects will likely be threatened unless contracts are negotiated and outstanding payments to landowners are received.

 

What to expect

With the most significant increase to gross national income to occur with the production and sale of LNG in 2015, controversy surrounding the project is also likely to peak around this time. The major benefit of the PNG LNG project to the national and provincial governments and landowners in the country will come from distributions of mining and petroleum tax revenue, mining royalties and dividends on equity. However, due to the increasing frequency of attacks, unfulfilled landowner contracts and allegations of corruption, with an increase in revenue, there is also likely to be an increase in violence in the country. This will likely be exemplified through the increased targeting of expatriate workers, protests at various project sites, work stoppages, and storming of government offices, including the potential taking of hostages.

 

Resource curse?

Encouragingly, however, there seems to be a growth in the activity of civil society organizations in the country, particularly in Port Moresby, stemming from the increased attention brought by the LNG project.  Recently, the government approved a state working group to investigate the implementation of the Extractive Industries Transparency Initiative (EITI), which is attempting to see greater transparency and accountability for payments associated with PNG's resources. Other organizations use online media to report on corruption or host government documents online. If the country is looking towards a renaissance in civil society, a longer term benefit may be that the state will no longer be able to alienate NGOs, civil society organizations or academic associations who demand its accountability.

 

Author: Brittany Damora is a Risk Consultant based in London and Singapore with AKE (www.akegroup.com) an international security and risk analysis firm. Published on 24/05/2011