Monthly Archives: April 2018

Backed by extravagant claims, PNG’s LNG project failed to deliver

Grand claims about the PNG LNG project, which runs through Papua New Guinea Highlands including this facility in Hela, have never eventuated, a new report claims. Photo: RNZ / Johnny Blades

Radio New Zealand | 30 April 2018

When the US$19 billion liquefied natural gas project was first pitched in Papua New Guinea, extravagant claims and grand promises were made about how it would transform the country’s economy.

But a new report claims that many of those promises have never eventuated, and instead, the impacts on the economy have been mostly negative.

The report, “Double or Nothing: The Broken Economic Promises of the PNG LNG Project,” was compiled by Jubilee Australia, a development research centre.

The scheme, run by the global energy heavyweight ExxonMobil, was promoted as likely to double the size of the PNG economy, create hundreds of thousands of jobs and grow household incomes by 84 percent.

None of this happened. Instead, Papua New Guinea’s economy grew by only 10 percent, household incomes have fallen by 6 percent, and employment has fallen by 27 percent.

One of the authors, former PNG Treasury official Paul Flanagan, said that on the projections of rapid growth and an influx of easy money, PNG’s government went on a spending spree from 2013-2015, which has since crippled the economy.

“The modelling that was behind those estimates for such massive increases in the economy – that’s poor modelling. It’s a model that’s still used in PNG unfortunately, the PNG Gem,” he said.

“It’s not very transparent, it’s a black box. It produces numbers that just aren’t realistic and we have seen that in subsequent plans also. “

Mr Flanagan said it was yet another example of PNG falling prey to the so-called “resource curse” in which the mishandling of opportunities undermined the economy.

“There would never have been a 50 percent planned increase in government expenditure from 2013 to 2015 if this project wasn’t in place and that has put massive strains on the economy.

“The exchange rate is overvalued – that would not have happened without this particular project. There has been an undermining of institutions. The negative impacts are associated with poor policies, associated with the resource curse,” he said.

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New $10Mil Vatukoula Shaft Ready Next Year

The two cable drums used in the construction of the new Dolphin Shaft. Photo: Charles Chambers

Site preparation is well under way, official groundbreaking ceremony is expected to take place on May 8.

Charles Chambers | Fiji Sun | 29 April 2018

A new ventilation and haul­age shaft is under construc­tion by Vatukoula Gold Mines.

With an investment of $10 million it is expected to be completed early next year.

The new 700 metres deep Dolphin shaft is being constructed with the main aim of providing better ven­tilation for the mine’s Philip Shaft.

This will be the first such shaft sunk at Vatukoula since the Philip Shaft was constructed by the for­mer Joint Venture between Emper­or Gold Mining and Western Min­ing in the mid 1980s.

The project, besides being planned to improve ventilation and working conditions for the Philip Shaft, will also see the opening up of new ar­eas for mining.

Although site preparation is well under way, the official ground­breaking ceremony is expected to take place on May 8.

The company’s Surface Project Manager, Onisimo Fonmanu, said the site was also where an old shaft was in the 1980’s.

“The shaft then was only about five levels deep which was around 160 metres.”

With the new shaft expected to be around 700 metres deep, the com­pany has hired expert contractors from China to carry out the project.

The shaft main purpose would be similar to that of an exhaust venti­lator.

Mr Fonmanu said: “The Philip shaft needs more air flow than what it currently has.

“This project is aimed at rectify­ing that,” Mr Fonamanu said.

A tunnel will be dug from the Phil­ip shaft to join with the Dolphin shaft and this new line will be used to suck the air out of Philip Shaft.

“Once it does this then the airflow will be much better and it would also be cooler too for the workers who work there.”

Mr Fonmanu said the work pres­ently being carried out at Dolphin shaft was a term called ‘shaft sink­ing.’

The work had to be done care­fully as while the shaft was getting deeper, they had to be careful of the sides not caving in.

“It is a project which has to be done carefully as we have people who will be working below as the shaft deepens.”

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Aussie taxpayers chipping in for mining giant

Millions of dollars from Australian taxpayers are being spent to seal the Boluminski Highway in New Ireland, in the shadow of the giant Lihir gold mine run by Newcreat Mining.

In total the Australian government is spending $400 million on Phase 2 of its Transport Sector Support Program in PNG.

Australian taxpayers are footing the bill for infrastructure PNG’s huge foreign-owned mines were supposed to pay for.

Boluminski Highway sealing underway

PNG Loop | April 27, 2018

Works are well underway in New Ireland on a major project to reconstruct 32.4 kilometres of the Boluminski Highway between Pinatgin and Loloba.

The K39.4 million project is being delivered through the Papua New Guinea – Australia Partnership, with the support of the New Ireland Provincial Government.

Australia is committed to supporting a prosperous Papua New Guinea. Works along the Boluminski Highway will help business and local communities access markets and services and boost the tourism industry in New Ireland Province.

Department of Works Secretary, David Wereh, is pleased to see the project progressing well.

“This is an important project on an essential economic corridor for Papua New Guinea. The project will nally link the centres of Namatanai and Kavieng with 265km of sealed maintainable road.

“This will be a signi cant achievement made possible through a long term commitment by the Papua New Guinean and Australian governments,” he said.

More than 140 local residents are employed on the project and works are expected to be completed by the end of December 2018.

The project is being delivered through the Papua New Guinea – Australia Transport Sector Support Program.

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Exxon LNG is hurting Papua New Guinea economy – new report

Photo: Michael Nagle

Jubilee Australia | 30 April 2018

A new report on the economy of Papua New Guinea shows that despite predictions of a widespread economic boost from the ExxonMobil PNG LNG project, on most economic indicators the economy has actually gone backwards relative to predictions.

Jubilee Australia’s new report ‘Double or Nothing: The Broken Economic Promises of PNG LNG’ is co-authored by Paul Flanagan, director of think tank PNGEconomics. Paul has worked for the Australian government in senior executive positions and with the PNG Treasury where he was Team Leader and Senior Advisor to the SGP Program from February 2011 to August 2013.

“In 2008 Australian economics consultants ACIL-Tasman provided inflated projections of growth in employment, essential services, household income and the broader economy if the PNG LNG project went ahead. This new analysis proves just how misleading these promises were and how PNG has slipped back into the poor policies associated with previous experiences of PNG’s resource curse. Currently, on almost all economic indicators, the people of PNG would have been better off had the project not happened at all,’ said Paul Flanagan.

The aim of this study was to compare the projected benefits for the early years of the PNG LNG project with the actual outcomes.

By building an ‘underlying growth path’ based on how the economy would likely have performed without the PNG LNG project, this study has made the following findings:

  • Despite predictions of a doubling in the size of the economy, the outcome was a gain of only 10% and all of this focused on the largely foreign-owned resource sector itself;
  • Despite predictions of an 84% increase in household incomes, the outcome was a fall of 6%;
  • Despite predictions of a 42% increase in employment, the outcome was a fall of 27%;
  • Despite predictions of an 85% increase in government expenditure to support better education, health, law and order, and infrastructure, the outcome was a fall of 32%; and
  • Despite predictions of a 58% increase in imports, the outcome was a fall of 73%.

These findings are even more extraordinary given that PNG’s exports (due to PNG LNG) have actually exceeded projections (106% relative to the higher figure of 114%).

The PNG LNG pipeline is an Exxon-led project which supplies about 8 million tonnes of LNG a year to Japan, South Korea and China from the gas fields of the Hela region. It is projected to run for 30 years. The project’s partners are Exxon, Oil Search, Santos and the Government of PNG. The Australian government lent AU$500 million of taxpayer’s money to the project.

“Over the next 9-12 months, a final investment decision is expected to be made about whether or not Total, in partnership with ExxonMobil and Oil Search, will start work on the development of the new Elk Antelope gas field in PNG. The new project, known as Papua LNG, has been projected to produce as much as 8.8 million tonnes per year for around 15 years.

“The economic findings of this report, are crucial to understanding the difficulties that large resources project can pose to a small economy like PNG. A decision on new gas projects should be informed by an accurate assessment of the impacts of PNG LNG,” said Dr Luke Fletcher, Executive Director of Jubilee Australia and co-author of the report.

‘‘Exxon and Oil Search should be paying half a billion dollars (AUD) to the PNG government every year, since the gas started to flow in 2014. Instead, they are paying a fraction of this amount, partly because of their use of tax havens in the Netherlands and the Bahamas.

“The fact that the revenues are not flowing at the levels that was predicted is a key reason why ordinary people in PNG are not seeing the sort of economic benefits that were promised to them when this project was first proposed.

The reports also demonstrates the dangers of relying on economic projections based on dodgy economic models that are paid for by the companies. The people of PNG should never let this happen again by insisting on independent and verifiable analysis before approving these sorts of projects concluded Dr Fletcher.

‘Double or Nothing: The Broken Economic Problems of PNG LNG’ is the first of two papers on the PNG-LNG pipeline that has been commissioned by Jubilee Australia. The second paper will discuss the unpaid royalties and development benefits and the escalating violence as a result of the PNG LNG project.

 

BACKGROUND

The PNG LNG pipeline consists of gas wellheads in the Hela Province in the Southern Highlands of PNG, a gas pipeline running from the highlands to just north of Port Moresby and an LNG liquefaction plant. The lead operator is Exxon-Mobil, although there is also significant involvement form the ASX-listed Oil Search.

It is the largest development project (in monetary terms: US$16 billion, further blowing out to US$19 billion) in the history of the Pacific region.

Construction on the project was started in 2010 and completed in 2014, at which point the gas started to flow.

Concerns about the economic non-viability of the project and the dangerous risks of social conflict in the project area were raised by Jubilee Australia in an open letter to Australia’s then Trade Minister Simon Crean in October 2009, two months before the decision was taken.

The letter to Mr Crean predicted that the PNG LNG project would not likely lead to poverty-reducing growth in PNG and would likely entrench a culture of corruption in the country. It argued that there was a serious risk of the project increasing social disruption and violence in the project areas. Finally, it claimed that the project would undermine the aims of Australia’s aid program in PNG.

Efic’s National Interest Account approval process was completed behind closed doors and, despite requests by politicians, journalists and Jubilee, the official advice given to Minister Crean, upon which the loan decision was taken, has never been revealed.

The Export Finance and Insurance Corporation (Efic) is Australia’s export credit agency. Efic provides loans, insurance and other financial services to Australian companies that do business overseas. Historically, around one quarter Efic financing by value goes to companies involved in the resources (mining, oil and gas sector). Projects supported by Efic have been implicated in environmental disasters (Ok Tedi mine, Panguna mine) and human rights abuses (Porgera mine, Panguna mine) and tax evasion (Oyu Tolgoi mine, Mongolia).

Exxon and Oil Search’s Use of Tax Havens

The report shows that since 2014, the project companies should be paying revenues of approximately 1.4 billion Kina (AUD$560 million), and yet they are only paying a fraction of this amount. The lack of revenues flowing are seriously undermining potential positive benefits to the PNG economy. The report argues that these missing revenues are a result of two phenomena: a secret commercial agreement struck between the companies and the government, and ExxonMobil and OilSearch’s use of tax havens in Holland, Delaware and the Bahamas. Indeed, Exxon appears to be using the same techniques to avoid paying taxes from its operations in PNG as, a recent Australian Senate inquiry has heard, it is also using for its operations in Australia.

About Paul Flanagan

Paul Flanagan is a Canberra-based economist and former federal public servant with many years of experience working in the field of aid, development, and economic policy. He worked in a range of policy and program roles in Australia’s overseas aid program from 1986 through to 2002. After this, he held a number of important roles within the Australian Treasury Department including head of the International Finance and Development Division during the Global Financial Crisis from 2008 to 2011. Paul was then seconded to PNG Treasury, where he was Team Leader and Senior Advisor to the SGP Program from February 2011 to August 2013 – a position at the same public service level as Australia’s High Commissioner to PNG. Since 2015, he has been the Director of PNG Economics.

About Dr Luke Fletcher

Dr Luke Fletcher is the Executive Director of the Jubilee Australia Research Centre. He is the principal author of a number of Jubilee’s reports, including Pipe Dreams (2012) about the PNG LNG project and Risky Business (2009) on the activities of Australia’s export credit agency, Efic. Dr FLetcher has a PhD in Politics and International Studies from the University of Cambridge and has been involved in Jubilee in both staff and Board roles since 2005.

About JARC

The Jubilee Australia Research Centre (JARC) engages in research and advocacy to promote economic justice for communities in the Asia-Pacific region and accountability for Australian corporations and government agencies operating there. Jubilee’s work has been quoted in Australia

and international media: The Australian, ABC, The Guardian, Reuters, The Asia Pacific Report. Jubilee has made Parliamentary submissions to a number of government inquiries as well as provided testimony. http://www.jubileeaustralia.org

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Porgera still at 25% capacity

PNG Industry News | 27 April 2018

BARRICK Gold is still evaluating the impact of the February 26 earthquake at its Porgera joint venture copper-gold mine in Papua New Guinea’s Enga Province.

It has, however, kept its 2018 group guidance unchanged at 4.5-5 million ounces of gold at all-in sustaining costs of $765-$815/oz, and 385-450Mlb of copper at $2.30-$2.60/lb.

The Porgera processing plant is operating at 25% capacity and is expected to return to full production by the fourth quarter.

The Canadian-based miner produced 1.05Moz of gold in the first quarter at an all-in sustaining cost of $804/oz and 85 million pounds of copper at AISC of $2.61 per pound.

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K5M Projects For Nimamar As Sir Julius Fires Broadside At Lihir Gold Mine

Chan: “We will light up the islands and shame the mining giant with the glow of our solar street lights” 

Post Courier | April 26, 2018

Traditional dance groups added colour to the launching of nearly K.5 million worth of projects for five wards in the Nimamar LLG on Malie Island in the Lihir group last Saturday.

The projects include 60 solar street lights to light up village communities in the four island wards from Malie, Masahet and Mahur.

But three boats and one sawmill marked the biggest village impact projects rollout that came under two project initiatives of the New Ireland Government – the Ward Level Project Policy and the Lighting Up New Ireland Policy’

Governor Sir Julius Chan, deputy governor and president of the Nimamar LLG, Ambrose Silul, PEC and provincial assembly members, shipping operator Michael Chan from Vanmak Shipping and staff from the governor’s office and Nimamar LLG gathered with the people to witness the occasion.

Sir Julius had the chance to meet with his people in the electorate. He was at Lambom to launch seven sawmill projects for the Konoagil wards last Thursday with the president James Pandi and then joined president Silul on Saturday to wind up the week.

He told the Lihir people that the Lihir gold mine is the third largest in the world and yet after 20 years in operation Lihir still was without a sealed ring road up until only three years ago, and no power to the inhabitants, even to the islands.

“We recognise that a lot of money for the province comes from Lihir so today I am happy to join with Ambrose so we can put something back to the place of origin. So we will light up the islands and shame the mining giant with the glow of our solar street lights and show that even though the the mine is not forthcoming, this government cares and does what we can to better the lives of our people”

Sir Julius said he’s optimistic of a better deal for the people in the negotiations under the MOA revision that will increase the mining royalty from the current 2% to 10%.

“We fight to put wealth in the hands of the people. Development won’t come if people have no money. If the people are rich the country is rich.”

He encouraged the people to rally behind their president who has been part of the major policies that have impact the province and elect good leader in the coming LLG elections.

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PNG can overide Bougainville laws – PM

Panguna mine. Photo: Wellington Chocolate Factory

Radio New Zealand | 26 April 2018

Decisions by the Bougainville parliament can be overidden by the national parliament, the Papua New Guinea prime minister says.

Peter O’Neill made the comment to news agency Reuters after the Autonomous Bougainville Government (ABG) announced earlier this month that it was placing an indefinite moratorium on a resumption of mining at Panguna.

Its president, John Momis, said the ABG imposed the ban as it did not want to disrupt preparations for Bougainville’s independence referendum next year.

Grievances caused by the mine were central to the outbreak of civil war in 1989, a 10-year conflict that cost over 20,000 lives.

When asked about the moratorium, Mr O’Neill said that the “constitution and the overall legislation from the national government is the one that underpins all the other legislation”.

“It’s subject to the main laws,” he said.

The vast Panguna copper and gold mine once generated nearly half of PNG’s annual export revenue.

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