Spotlight on Australian govt financing role in LNG Project

“So the Australian tax payer’s getting paid and the population of PNG is not”

Radio New Zealand | 13 June, 2017

The Australian government’s Export Finance Insurance Corporation has been questioned in the senate about its role in Papua New Guinea’s LNG Project.

EFIC’s US$350 million loan to the PNG LNG Project was the biggest ever foreign loan made by Australia’s government.

There’s been particular scrutiny applied to EFIC’s response to the non-payment of royalties to LNG Project landowners.

PNG’s LNG Project, lead operated by ExxonMobil, has been successfully shipping annual exports worth billions of dollars since 2014.

However landowners in the project area say they have not been paid royalties promised them under the project’s founding agreement, estimated to total US$300 million.

Western Australia’s Senator Scott Ludlam took EFIC to task over why it had not taken measures to ensure payments were made.

“So I understand that, May 2017, the 300th shipment of LNG left Port Moresby, but the payment of royalties owed to landowners under benefit sharing arrangements hasn’t even begun,” he said.

EFIC’s director of environmental and technical review, Jan Parsons, told the senator royalties were not its responsibility.

“It’s the benefits, the royalties as you say, which only started flowing after LNG gas started being exported.”

“That is the part which is managed by the government, and the project has no role in that, legally or morally, if you like,” he said.

“And my understanding of the problem that’s holding up the distribution of those payments is identifying the actual people who should be receiving the payments.”

Senator Ludlam sensed EFIC was trying to distance itself from its project obligations, by identifying royalties as strictly a government matter.

“It’s easy to say that it’s not a project matter. But landholders have been dispossessed. They’ve been told that they’d be paid out.”

“There’s an amount of benefits which I understand is in the range of 400 million Australian dollars which hasn’t actually hit the ground. And this thing is busy exporting PNG LNG over the horizon.”

According to PNG’s Treasurer for the past three years, Patrick Pruaitch, the identification process Mr Parsons referred to, or clan vetting, should have been completed well before the first LNG shipment left PNG’s shores.

Mr Pruaitch admitted the Peter O’Neill-led government, of which he had been a key member until recent weeks, had failed to resolve this issue.

Jan Parsons would only offer that the Project was trying to help the government in identifying the landowners who should receive the royalties

“And in speeding up the payments, because it’s in the Project’s interests. But that’s something the project is doing, not as a legal matter, but being a good neighbour, if you like.”

Senator Ludlum mentioned reports of an arms build-up and escalating tensions among landowners in the region where LNG Project’s well heads are based, the Highlands province of Hela.

“When does the Commonwealth start to get its money back?

EFIC”s chief credit officer John Pacey stepped in to answer the question

“Repayments have already commenced.”

“So the Australian tax payer’s getting paid and the population of PNG is not. That seems a little peverse,” Mr Pacey said. 

“What are the risks to Australia being repaid if we end up with another Bougainville on our hands through civil unrest, armed or otherwise, in the impact area where people are likely pretty pissed off that they’re 400 million dollars short of the royalties that they’re owed?”

Export Finance Insurance Corporation wouldn’t be drawn on impacts of a “hypothetical” situation, telling the senator it had evaluated risks of the project, but not specifically about the potential for armed conflict in relation to the project.

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Filed under Financial returns, Human rights, Papua New Guinea

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