THE PNG LNG project, which is expected to generate billions for the economy, is a vote of confidence on the performance of the current Government, as some Government advisers suggest.
The LNG project covers key locations which include Juha production facility, Hides gas to electricity plant, Hides gas conditioning plant, Agogo production facility, Kutubu central processing facility, Gobe production facility, Kopi shore base, Kumul marine terminal and LNG facilities in Central province. Along the pipeline we have villages right from Siabi to Papa and Lea Lea.
With the current global financial crisis and the weakening of the US dollar, the PNG LNG project should craft the path to tangible development. The need for energy is growing. In the 1950s, oil and natural gas became the main source of primary energy for the increasing world population. Large financial institutions and governments have been at the forefront of investing in energy.
Petroleum consumption carries major environmental impacts such as air pollution, global climate change and water contamination. Exploration and production of petroleum have caused detrimental impacts on soils surface, ground waters and ecosystems. Despite such impacts, PNG is experiencing its share of global energy demand, which seems to supersede environment and air pollution concerns.
The Government and developers know very well that the oil and gas industries generate significant revenues for the national economy and it is quite imperative to have sound macroeconomic policies in place so that the revenues generated are converted into social capital and lead to broader based overall economic development and poverty reduction as a whole.
Research done on the conversion of revenue into improved social capital seems to point to negative social and environmental outcomes. Resource developments have failed to generate sustainable benefits and it is likely to get worse given the current political climate and policy development regimes at the bureaucratic level.
At the village level, most villages along the LNG project do not have proper road networks, telephone, hospital, banks and other important basic infrastructure. There are hardly any sustainable and efficient benefits received from some of the multi million kina projects around the country. We expect better hospitals, better schools and urban towns to develop as a result of active mining, exploration, and logging activities but that is not the case. Even at the national level, the royalties and tax income do not translate into long term growth in human and physical capital.
There is an urgency for the Government and key stakeholders to manage the existing problem by establishing good governance and management bodies (although we have other key government statutory bodies) that will effectively manage and distribute revenue across all sectoral developments and in consultation with principal resource owners develop plans to use the resource revenues to avoid squandering. PNG does not even seem to have a prudent Energy Policy Act that could monitor water discharges from oil and gas exploration, processing and treatment, operations or transmission facilities.
Oil and gas are part of the energy demand that is unstoppable worldwide and such an act should provide opportunities for the local communities, particularly those affected by the LNG project, to improve their living conditions. The local resource gas pipeline owners do not have access to reliable energy sources and knowledge and the capacity to be active participants in the development.
One may still argue that royalty payments are given but the question still remains as to how effectively such monies are used. The LNG resource owners do not have any idea about venturing into the renewable energy business and it is mostly likely that the monies will be used on real estate, transport and agriculture.
It is a widely held view that communities in isolated areas such as Juha, Gobe, Baina, Kaiam and others are not attractive targets for the distributors of electricity or natural gas since they are perceived to lack the ‘critical mass’ and the ability to pay.
Given this scenario, it is important to know that the use of natural gas has the potential for widening access to electricity, since it may be readily used for small-scale power generation, and for a wide spectrum of household, commercial and small industrial uses. Pilot projects in Africa of small rural gas applications have proven successful. Using stranded gas reserves or new gas pipeline systems, it is possible to address this obstacle by developing economic small gas projects for such rural communities along the PNG LNG Gas project.
To mitigate the adverse impacts of such developments, it is of critical importance to develop within the indigenous communities a basic knowledge about the benefits of the hydrocarbon industry.
* Christopher Papiali is a senior lecturer with the department of business information systems at the Divine Word University in Madang.