LNG projects – a rush job?

BEFORE the ink is dry on PNG’s first liquefied natural gas project, the Government has signed the second LNG project into existence, just two days shy of Christmas.
Is this the Government’s Christmas present to PNG?
Will two projects mean double the benefits?
We think not.
It seems, like the first project, all too rushed.
The big question is: Why the big rush?
PNG has never had a LNG project. It has no experience.
The first project, promoted and managed by world LNG leader, ExxonMobil, has not yet begun construction.
For all intent and purpose, although the agreement is in place, it is not a project until all the financial arrangements are finalised, until the construction is begun and completed.
The first project was rushed “in record time” in the words of project manager Peter Graham in two years flat.
In the end, to meet a Dec 8 deadline by the developer, the resource owners’ concerns were bulldozed and the Government unashamedly became a co-conspirator in providing inducements to landowners in order to get them to sign the licence-based benefits sharing agreements (LBBSA).
Even so, one of the most important group, the Hela Tuguba – Hela’s fourth son and custodian of the gigira laitebo, the fire in the ground at Hides – did not sign the LBBSA.
They have chosen to go to court to press for their rights instead. It is uncertain what the outcome of the case will be.
PNG does not know whether its Government has given away too much by way of concessions.
Could the deal have been better?
Could it have been done another way?
Those are questions that can only be known after a project has been running for a while.
Other questions beg answers. Will the State will also be taking up its 22.5% equity option in this second project as well?
If it does, what impact might that have on its debt situation?
Will it not be overexposing itself considering that it has mortgaged all its shareholding in Oil Search to secure its interests in the first LNG?
Some supplementary legal and administrative arrangements pertaining to the first project might not even be in place.
The ExxonMobil-led project intends to employ only 1,500 nationals out of 7,000 needed for the construction phase and, even then, skilled manpower for the national workforce requirement is not there.
So where will staff for the se­cond project come from?
Will it not want to get involved in other aspects of the business which it has chosen to ignore in the first one – for instance ow­nership of the pipeline or in marketing the gas or in shipping?
It is expected this second project will be an exact replica of the first one – in the interest of fairness.
If it were to be different, particularly if the State were harsher with its conditions on this one than the first, would it not be unfair?
If it gave too much to this one, would it also not be unfair on the first project?
In approving a second project, promoted by a competing group, it might well turn out that PNG’s own LNG projects are competing for markets. Is that good?
The PNG LNG project includes a 248km pipeline, much of which will penetrate previously undisturbed primary tropical forests with biodiversity of glo­bal significance.
It is said that some 2,809ha will be cleared, including some 1,055ha of primary tropical fo­rest.
The pipeline will cross 26 major water crossings, 138 minor water crossings and will cross a 407km offshore pipeline.
Nobody can tell what the impact will be on the environment as well as on the people who will be resettled.
Most of the construction workers will be expatriates and mostly male. What impact that will have on the local communities, on existing infrastructure and services is unknown.
There are far too many questions, for which, we have too few answers.
The answers can only come when PNG has had experience with the one project.
There are questions about whether or not the exiting fiscal regime is really best for PNG, whether PNG could at the very least have considered revising the colonial regime that was imposed upon the country with a view to upgrade the law on ow­nership of resources, for instan­ce, for this last major resource.