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Saturday 19 Aug 2017 | 10:06 | SYDNEY
Saturday 19 Aug 2017 | 10:06 | SYDNEY

LNG for PNG: Only the beginning

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19 March 2010 10:18

Papua New Guinea has been obsessed for the last year with the promise of unprecedented revenues from Exxon Mobil's US$15 billion investment in a liquefied natural gas project.

Exxon Mobil announced financial closure of the project last week, meaning the project will now proceed in full.

PNG is hardly new to the resources business but the size and scale of the LNG project dwarfs any previous investment in the country. The announcement was welcome news for Prime Minister Somare, who celebrated his 42 years in Parliament this week with some chocolate cake.

The PNG Government has been so focused on finalising the deal with Exxon Mobil over the last year that little high-level thinking has gone into how the Government will meet the expectations of population to turn windfall revenues into better services and higher living standards. The early signals of the challenges ahead are certainly rather daunting.

Serious incidences of tribal violence in early 2010 in the Southern Highlands and in villages near Port Moresby have been linked to disputes over land ownership related to the LNG project. Port Moresby residents are reporting a significant rise in the cost of living since the arrival of Exxon Mobil in PNG. Inflation is forecast to rise to 9.5 per cent in 2010. 

It is also unclear whether the up to 7,500 promised construction jobs will be available to PNG citizens or mostly taken up by skilled foreign labourers. Previous influxes of foreign labour, particularly from China, have provoked violent reactions in PNG, so the Government will need to manage the employment expectations of its people carefully.

As Paul Barker, the Director of PNG's Institute of National Affairs has pointed out, PNG does not have a good track record with converting resources wealth into better services and infrastructure.

The PNG Government has plenty of experience and advice to draw on this time – maybe this is the one opportunity that it can use to transform the country.

Photo by Flickr user cackhanded, used under a Creative Commons license.

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