Learning the lessons from the past

 THE moment has arrived; Papua New Guinea is standing on the threshold of becoming an exporter of liquefied natural gas (LNG). 

Unprecedented levels of revenue will flow from the sale of gas which, is going to happen slightly ahead of schedule and that, in the words of Oil Search managing director Peter Botten, is excellent news.

For a project of its size and complexity to complete all construction work and arrive at production slightly ahead of schedule is no mean feat.  

The gas is from mainly the new Hela province but to bring it port, the project pipeline of about 700 kilometres runs through Southern Highlands, Gulf and eventually Central province.

It was quite an achievement. Aside from the intricacies of landowner issues and problems with the public service operations involved, generally, the news this week that production has started must have got everyone happy and excited.

In the midst of all the ex­citement, there is every reason to be on guard to avoid us falling into the same pitfalls of squandered and misspent revenues from previous resource projects.

In the 1970s, with the opening of Panguna, touted as the world’s largest copper mine then, Papua New Guinea shifted from purely an agricultural economy to start earning foreign exchange from its mineral wealth significantly. 

Years later, more mines such as Ok Tedi, Porgera, Lihir, Tolukuma joined the club of mineral exporters pumping millions of kina into the economy.

Then in the 1990s, PNG became an oil exporting nation, albeit a somewhat insignificant one in comparison to the Arabs and North Africans. 

Yet that signalled another page in our economic history.  

So we had money coming in from agricultural produce, minerals and crude oil.

Today, liquefied natural gas will be included in the list of commodity exports from Papua New Guinea.

Many learned commentators, both local and visiting international experts, have pointed out that ours is not an issue of resource availability but one of managing those resources.

On the eve the country’s first shipment of LNG abroad, we should look back in history at how we had fared managing our mineral and hydrocarbon revenues.

Panguna, at one stage, gave the country’s its largest slice of revenue from its 19 per cent stake in the mine yet there was growing discontent among Bougainvilleans as little was going to them in the 17-year mine life.  That was compounded with claims of environmental destruction, which led to its closure and 10 years of civil war on the island.

When oil began flowing from Oil Search fields at Kutubu, Gobe and Mananda, the country again realised a fresh injection of foreign earnings. 

While the principal company and others indirectly associated with the export of oil, saw significant growth in capital and expansions, the local resource owners have had mixed fortunes.

A handful of landowner companies have been outstanding success stories but elsewhere the story is rather bleak.  “There is nothing to show for all oil flow,” has been an oft-repeated cry from some quarters.

Admittedly, governments, landowner groups and individual tribal leaders have missed great opportunities to properly manage and invest the revenues.  

There has been a lot of wastage, and resulting misery for families and clans.

Because of the anticipated millions to come from the LNG project over a period of 30 or more years, there are well-founded reservations about the country’s ability to use the benefits prudently. The creation of a sovereign wealth fund therefore gives hope that such revenue will be stowed away for the future.

Provided such a fund retains its independent status and integrity and is free from all manipulation, Papua New Guineans can rest assured that there would something to fall back on in time of need.

The country’s accession to standards of the Extractive Industries Transparency Initiative (EITI) should promote openness and accountability in the management of resources.

Natural resources belong to a country’s citizen’s.  Extraction of these resources can lead to economic growth and social development.

However, when poorly managed this has resulted too often in corruption and conflict. We have walked down that road before.