Resource projects need vital services

 IT was reported in the media that the developer of P’nyang Gas, ExxonMobil, and the Government are planning to integrate this new project into the PNG LNG project. 

The Minister for Petroleum and Energy, Nixon Duban, stated that it would be uneconomical to establish a standalone project due to the high costs and risks involved in such venture. 

He added that the available reserve does not warrant a standalone project. 

The decision by the developer not to establish a standalone project is purely a business decision as no profit oriented entity would like to invest in high risk and cost venture with minimal returns as it would make a loss. 

The local people want a standalone project but the developer wishes to integrate it with the PNG LNG project. 

If such plans eventuate, the stakeholders, including landowners, provincial government and local level governments will benefit only from the stipulated percentage encapsulated in the Oil and Gas Act, which is a farce compared to what the developer will be earning from the sale of the gas. 

Worse still, the State and even investors usually fail to honour their commitments as shown from the numerous landowner grievances in other resource projects. 

In P’nyang’s case, the developer did not want to incur unnecessary cost and made a cost effective decision to incorporate the gas into the current PNG LNG project. 

Indeed, there may be other underlying issues that may have influenced this decision but it is quite evident from the minister’s statement the cost issue seems to be the main factor. 

The decision may be partially due to the absence or lack of essential government services such as electricity, telecommunication, water, transport infrastructure and lawlessness among others. 

The absence of these services is a deterrent to many investors willing to operate in rural areas as they do not want to incur the huge cost burden in providing any of these services to sustain their operations. 

The Government should plan ahead to establish such essential services in strategic areas where there is a high possibility for resource development.  

North Fly District has the potential to become a leader in hosting various economic petroleum projects and the local MPs, public servants and the Government should lift the standard of services to make it more conducive for developers to establish standalone projects as well as downstream processing facilities in the future. 

Encouraging standalone projects as well as downstream processing will provide the economic stimulus needed to grow the local economy as well as make the people to gainfully benefit in the resource developments.  

Eugene Kambut

Port Moresby