Tag Archives: Exxon-Mobil

Poor LO Identification Was The Biggest Mistake Of The First PNG LNG: Maru

So will the government refuse to sanction new projects if the identification is not done properly?

Matthew Vari | Post Courier | January 21, 2019

National Planning Minister Richard Maru has said the biggest mistake ever made for the first PNG LNG project was the lack of landowner identification before going ahead with the project.

Mr Maru said this when making reference to the next lot of key mining projects set for development within the next couple of years and the need for developers to learn from such oversights.

“The biggest mistake we did with the PNG LNG project is that we didn’t identify the landowners first, that is a requirement by law and the responsibility for that is on the resource developer and not the government, I want to make that clear,’’ he said.

“My appeal to the proponents of the Freida project and Wafi-Golpu is to make sure all the landowners are identified now and they all have NID (National Identification) cards.

“Identify them early so we do not have the same problem when it comes to the distribution of royalties and deciding who we deal with.”

He made the call to companies not to make the same mistakes and go out early and identify the genuine landowners.

“It will help the forum process because the right people will come and talk.

“So I want to appeal to the developers while we support the project we want them to follow the laws and identify the landowners now early so when it comes to negotiations, the right people are represented and they have their say so we avoid problems in the future.

“By just following the lawful legal processes established by law to make sure we involve our people very early,” he said.

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Papua New Guinea Clans Unite Against Exxon

Armed clansmen in the town of Komo in Papua New Guinea’s Hela Province. Photo – Michael Main

Irina Slav | Oil Price | January 19, 2019

Papuan landowners and communities in the vicinity of Exxon’s Papua New Guinea LNG project are growing increasingly disgruntled about how the company and the national government are handling royalty distribution, a Reuters investigation has found. This sentiment has led to inter-communal clashes in some areas and might lead to more serious trouble for the project.

“Our clans fought each other, but now there is peace; we are one team fighting Exxon.” These are the words of a local clan leader, Johnson Tape, one of 16 such leaders who are claiming rights over the Komo Air Field, which is used by the PNG LNG project, Reuters’ Jonathan Barrett and Tom Westbrook write.

They also relate the story of one local landowner who was promised a much higher royalty once PNG LNG began operating than she actually received. This landowner and others blame both the local government and the project operator for failing to fulfill their compensation promises. For now, it seems that this disgruntlement is more of a passive attitude, but Tape’s words could be an early warning for something worse to come.

There is a precedent. Last year, a devastating 7.5-magnitude earthquake shook the country, suspending operations at PNG LNG. The earthquake came amid growing tensions among local landowners already unhappy with Exxon’s project and with the government, sparking protests among the locals. In one part of the country, the Southern Highlands, the protests were violent enough to prompt the government to declare a state of emergency for the province.

In the Hela province, where a lot of PNG LNG production and transport facilities are located, protesters set some construction equipment on fire and landowners blockaded a wellhead in the production part of the PNG LNG project, threatening to shut it all down. That spurred the authorities into action and a little later representatives of the landowners said they were getting close to a deal with the government. Apparently, they haven’t gotten close enough to end the bad blood to date.

The PNG LNG project cost US$19 billion and had a nameplate annual capacity of 6.9 million tons of liquefied natural gas. Yet in 2017, the project yielded as much as 8.3 million tons of LNG, according to the Reuters investigation. Since 2014, when production began, Exxon has raked in some US$18.8 billion in revenues, also according to Reuters since the company does not release figures for PNG LNG.

However, the Papuan government’s expectations for its own revenues were revised substantially down from the initial 2012 estimate of US$22 billion over the productive lifetime of the project, until 2040. Last year, these were calculated at just half the initial amount, on the back of tax deductions for the operator and its partners, and lower gas prices.

An investigation by the World Bank found that the companies behind the project had developed “a complex web of exemptions and allowances that effectively mean that little revenue is received by government and landowners.” This doesn’t really bode well for the future of PNG LNG unless Exxon and its partners somehow renegotiate the terms of their agreement to avoid a buildup of tensions with unpleasant consequences all around.

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In Papua New Guinea, Exxon’s giant LNG project fuels frustration

Locals walk along a small beach where an LNG) carrier, Kumul, is docked at the ExxonMobil operated LNG plant at Caution Bay, located on the outskirts of Port Moresby in Papua New Guinea, November 19, 2018. Picture taken November 19, 2018. REUTERS/David Gray

Jonathan BarrettTom Westbrook | Reuters | January 17, 2019

From her red-roofed home near Papua New Guinea’s capital of Port Moresby, Isabelle Dikana Iveiri overlooks a giant plant used by Exxon Mobil Corp to liquefy billions of dollars’ worth of natural gas before it is shipped to Asian buyers.

Dikana Iveiri can also see swaths of muddy shoreline, where mangroves have been felled for firewood by locals who don’t have electricity, gas, or money to buy either.

The $19 billion Exxon-led PNG LNG project was supposed to be a game-changer for PNG, a vast South Pacific archipelago beset by poverty despite its wealth of natural resources.

But much of the promised riches, through taxes to the government, royalties to landowners and development levies to communities, have arrived well below Exxon’s own commissioned forecasts, if at all, according to landowners, the World Bank and the PNG government.

“My family has been here a long time,” said Dikana Iveiri, one of several landowners interviewed by Reuters near the PNG LNG plant. “Our royalties are not going well; they are using our land but not paying us properly,” she said referring to both Exxon, which pays the royalties and the government, which distributes them.

Since gas exports began more than four years ago, Dikana Iveiri said she had received just one royalty payment in 2017. She was expecting about 10,000 kina ($2,885) based on information given to her by the government and community leaders. She said she received 600 kina.

Exxon, community leaders and the government did not comment on Dikana Iveiri’s specific situation but in a statement to Reuters, Exxon said distribution of royalties and benefits to the LNG plant site landowners started in 2017. Cash payments to individual landowners would depend on how many landowners were in a precinct and were just one of the benefits communities received, Exxon said. 

The project employs nearly 2,600 workers, 82 percent of whom are Papua New Guinean and Exxon said it has invested $360 million to build infrastructure and pay for training and social programs.

“We could not be more pleased to see how the benefits are flowing to the communities at the LNG plant site, to see how investments are being made in important infrastructure such as schools and health that demonstrates the process is a good one and it works,” ExxonMobil PNG Managing Director Andrew Barry told a mining and energy conference in Sydney in December.

Barry said Exxon was hoping royalties would begin flowing in the pipeline and upstream areas “in the not too distant future”.

The government admits it has made mistakes.

PNG Prime Minister Peter O’Neill, who was part of the government but not the leader in 2009, said many of the disputes around PNG LNG stemmed from the way the government and Exxon proceeded with the project without first resolving landowner claims.

“It should have been done before, it wasn’t only for Exxon and the partners but even the government at the time did not do the proper clan vetting, proper identification of the land owners – they allowed this project to go on without that,” O’Neill told Reuters.

Treasury, the treasurer, and the Prime Minister’s spokesman declined to provide responses to Reuters’ questions about the project.

GAS-POWERED MONEY SPINNER

PNG LNG was completed ahead of schedule and exported 8.3 million metric tonnes in 2017, compared to its anticipated design capacity of 6.9 million tonnes, according to the project’s website.

Exxon does not disclose the project’s revenue or profits but research house Morningstar estimates it has generated $18.8 billion in revenue for Exxon and its partners since production started in 2014.

The project’s break-even price of around $7.40 per million British Thermal Units (mBTU) compares favorably to an average over $10/mBTU for eight recent gas projects in the region, according to analysis by consultancy Wood Mackenzie and Credit Suisse.

“The plant capacity has performed phenomenally,” Credit Suisse analyst Saul Kavonic told Reuters. “On cost, it’s much lower than peers … it’s got an ample resource base and it’s got a well-disciplined operator in the form of Exxon.”

The project’s contribution to Papua New Guinea’s economy and government finances is less clear.

PNG’s Treasury does not report project income figures, but government budget papers show tax revenue flowing from PNG LNG has been well below expectations.

In its 2012 budget, the PNG government estimated it would receive $22 billion in revenue over the project’s life to 2040.

In November, the government slashed its revenue forecast in half to $11 billion over the life of the project.

It identified 11 tax concessions, which along with a drop in gas prices, amounted to hundreds of millions in kina in annual revenue forgone.

A 2017 World Bank analysis found the project partners had negotiated favorable methods of calculating royalties to the government that allowed them to take various deductions. 

Combined with tax concessions, the project created “a complex web of exemptions and allowances that effectively mean that little revenue is received by government and landowners,” the World Bank said.

Exxon did not respond to questions regarding the World Bank findings and the World Bank declined to provide further comment.

Exxon’s partners, which include Australian-listed Oil Search Ltd and Santos Ltd, and a subsidiary of Japan’s JXTG Holdings Inc, referred Reuters’ questions to Exxon.

Exxon said in a statement to Reuters the project has generated 5 billion kina in revenue for the government and landowners via taxes, royalty and benefit payments. The figure includes revenue to the PNG state-owned stakeholders.

“SOME MISTAKES”

A second LNG project, Papua LNG, led by France’s Total with Exxon and Oil Search as minority partners, is scheduled to finalize an agreement with the PNG government in early 2019.

Papua LNG, a new gasfield using the same but expanded processing plant, could commence production as soon as 2024, according to Total. Analysts estimate it will cost around $13 billion.

“The experience of the first project developed by Exxon and Oil Search, there was some criticism, some mistakes,” Total CEO Patrick Pouyanne told Reuters in an interview in Port Moresby, referring to relations with landowners.

“Some lessons (are) being taken out … around the management of landowners and trying to engage at an early stage with them.”

Total has agreed to an undisclosed annual minimum payment to the government and to reserve some gas for local industry, he said.

Exxon did not respond to requests for comment on Pouyanne’s statements.

In its statement, Exxon acknowledged that “distribution of royalties and benefits in some project areas were delayed since the start of production due to court action by a small number of landowners which prevented the relevant government departments from completing their administrative processes.”

Exxon said it was committed to assisting the government ensure landowners receive royalty and equity dividends as soon as practicable.

Disputes have broken out within communities near PNG LNG facilities as landowners fight to have their claims recognized.

Some clashes have been fatal, said Highlands clan leader Johnson Tape, one of 16 clan leaders with a claim over the Komo Air Field, used by the Exxon project.

“Our clans fought each other, but now there is peace; we are one team fighting Exxon,” said Tape.

Christopher Havieta, the governor of Gulf Province, where gas fields for the new project are located, said locals wanted to avoid the experiences of Exxon’s PNG LNG.

“It was a foundation project and so a lot of exemptions were made and the end result is we have a lot of social problems that have risen up.”

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LNG landowners stopped when trying to damage office

Hides Gas Conditioning Plant in Papua New Guinea. Photographer: Richard Dellman via Exxon Mobil Corp.

The National aka The Loggers Times | November 23, 2018

POLICE managed to stop landowners from damaging the Petroleum Department office in Port Moresby on Wednesday, according to the National Capital District/Central police commander Assistant Commissioner Donald Yamasombi.

“A fight between two landowner groups at Konedobu at about midday was believed to be over the frustration of the delay to their royalty payments,” Yamasombi said.

“Police were called in and they dispersed the crowd and some arrests were made. They have been detained at the Badili police station”.

Meanwhile, acting Badili police station commander Chief Sergeant Paul Angua said 32 landowners were arrest and detained without being charged for two days. “Although it is alleged to be breaching their human rights, we cannot release them unless the complainant, who is a Petroleum Department officer, writes to us to release them.”

However, Hides Petroleum Development Licence 7 umbrella chairman Erick Hawai said 32 landowners were detained at Badili.

“The issue got out of hand and the department staff injured and properties were damaged when a Hides project coordinator allegedly provoked the landowners,” Hawai said

He said hurtful words were uttered which angered the landowners and service providers resulting in a rampage.

“There were exchanges of stones, sticks, irons bars and fists, most of the landowners were injured and taken to the accident and emergency ward at the Port Moresby General Hospital”.

Hawai is appealing to Petroleum Minister Dr Fabian Pok and the acting Department Secretary Kepsey Puiye to intervene and settle the issue.

“This must be done within this month before more problems will emerge here n at Hides PDL 7 Project site in Hela,” Hawai said.

Angry landowners from PDL 1-6 entered the main gate in two truckloads and started throwing stones on the building, sources said.

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Papua LNG group signs MOU with Papua New Guinea

Rick Wilkinson | Oil and Gas Journal | 16 November 2018

The Papua LNG joint venture partners led by Total SA have signed a memorandum of understanding with the government of Papua New Guinea for development of the Elk-Antelope gas-condensate fields, known as the Papua LNG Project.

The scope of the agreement includes priority terms and conditions forming the basis for a gas agreement as well as a timeline for negotiation. The gas agreement is scheduled for finalization during first-quarter 2019.

The MOU follows the Papua LNG and the ExxonMobil Corp.-led PNG-LNG joint venture parties reaching broad alignment earlier this year on the preferred downstream concept for the next phase of LNG development in Papua New Guinea.

The plan involves the construction of three 2.7 million tonne/year capacity LNG trains on the existing PNG-LNG plant site at Caution Bay just west of Port Moresby. Two trains will be supplied with gas from the Elk-Antelope fields and the third train by gas from existing PNG-LNG fields and the yet-to-be developed P’nyang field in the Western Highlands. Together Elk-Antelope and P’nyang contain an estimated 11 tcf of undeveloped 2C gas resource.

The Papua LNG Project is based on the Elk-Antelope reseources in petroleum retention license PRL15 in the Eastern Highlands. Total has 31.1% interest, ExxonMobil has 28.3% interest acquired when it bought InterOil Corp. earlier this year, and Oil Search Ltd. has 17.7%. These percentages are after the state of Papua New Guinea has backed into the project for 22.5%.

Papua New Guinea Prime Minister Peter O’Neill labeled the MOU as “another historic moment for Papua New Guinea and the beginning of the development of the second LNG (Project) in our country.”

He said, “Today’s memorandum paves the way for us to enter into a project gas agreement which will be negotiated between the parties over the next 3-4 months and to be concluded by Mar. 31, 2019.”

Peter Botten, managing director of Oil Search which, like ExxonMobil, is a participant in both joint ventures, said pre-FEED downstream studies on the three-train development concept are well under way. The scope of the engineering work includes design, process, and layout optimization of the expansion concept from the gas inlet to the LNG loading arm.

“Work taking place includes the brownfield tie-ins, compressor driver selection, LNG loading and shipping, condensate treatment, storage and loading, and execution planning,” Botten said. “We expect this will underpin entry into the full FEED stage.”

Botten added that discussions between the government negotiating team and the P’nyang (PRL—3) joint venture are well advanced. “With an integrated FEED entry decision required to advance the three-train expansion at the PNG-LNG site, completion of the gas agreement between the government and the PRL-3 joint venture is expected to occur in a similar timeframe to the Papua LNG Project,” he said.

The recent MOU for Papua LNG was signed as a show piece for Papua New Guinea during the Asia Pacific Economic Conference (APEC) in Port Moresby in the presence of Papua New Guinea Prime Minister O’Neill and Total Chairman and CEO Patrick Pouyanne.

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Major Project Agreements Must Be Reviewed To Benefit PNG

There have been many complaints of a lack of benefits coming from the LNG project Photo: RNZI/Johnny Blades

The Current Business Model and Tax Concessions are Cheating PNG of Revenues and Landowner Benefits

Post Courier | November 15, 2018

In the period leading up to and eventual start of the multi-billion kina PNG liquefied natural gas (LNG) project in 2014, there was much fanfare and grandstanding of the promise/premise that the project would single-handedly transform PNG.

In fact, the project has delivered some much-needed tangible developments in terms of major infrastructure, additional employment and spin-off business opportunities as well as foreign exchange revenue. However, there are still many unresolved issues that demand National Government’s most swift and appropriate remedial action.

On October 30 2018, it was reported (Post-Courier) complaints by Paguale Kekero resources landowners association from Southern Highlands Province over benefits from the PNG LNG project. The report referred to major clans with population of over 2000 people “left in the dark on LNG project benefits” – royalty and equity payments.

Their complaints followed a public statement on October 25 2018 by Mineral Resource Development Company (MRDC) Managing Director Augustine Mano of PNG LNG pipeline landowners receiving benefits. The concerns relate to Paguale Kekero resource owners not signing any agreement in the Umbrella Benefits Sharing Agreement under the Greenfield and future generations benefits.

The Paguale Kekero landowners concerns are among numerous other claims and counter-claims, be the genuine, not genuine or combination of both. So, the over-orchestrated myth of massive and immediate socio-economic transformation in the livelihood of resource owners, others in the project area and PNG as a whole is increasingly becoming a far-fetch tale.

PNG-wide, similar sentiments have been expressed over resource ownership, equity participation and the sharing of wealth generated from mineral, oil and gas reserves. As more resource owners become aware of their missed opportunities, there is mounting support from indigenous people for greater benefit from what is taken out of their land and sea.

They are rightly doing so because if anyone, these people and their ancestors have been living on and off that land or sea for over 40,000 years from one generation to next. Whilst PNG authorities continue to grapple with this contentious issue, plans are afoot for the ownership of resources to be transferred from the State as is the norm currently to the resource owners.

There has also been numerous calls for a comprehensive review of existing memorandum of agreements (MOAs) with project developers and provinces they are located. Some serious questions remain unanswered in the manner in which past governments proceeded to signing certain major project agreements. In fact, these are still burning issues that need government action by way of review of project agreements.

In that way, many landowner related issues and concerns, equity participation, wealth sharing and tax revenue can be addressed and resolved amicably.

The government must take heed of these concerns and start reviewing major project agreements. The underlying objective must be to cater for increased local equity participation by way of buying shares in these big resource development projects.

On May 14 2013, former Public Enterprises Minister Ben Micah while answering questions in Parliament alluded to the loss of millions of kina in tax revenue resulting from tax exemptions. Mr Micah’s comments may not have attracted much attention, but what he said then is still relevant day and needs follow-up action. There is nothing wrong for the government to admit fault, but take appropriate remedial actions to correct any wrongs of the past in PNG’s national interest and benefit.

A government decision for comprehensive review of agreements the State had entered into with developers in major projects would be well-received and welcomed nationwide. There are numerous concerns and un-answered questions that need clarification for and on behalf of the majority PNG citizens.

Today, questions are still asked why the Ramu Nickel project agreement was signed in China.

What input did relevant PNG State agencies, including Justice and Attorney General, Department of Finance, Commerce and Industry, Customs and Internal Revenue Commission and the Madang Provincial Government have in the Ramu Nickel project?

In December 2013, some agreements were reached and the review of the Ramu Nickel agreement was concluded and signed by relevant stakeholders. That is exactly why reviews in all project agreements are necessary and should be done within the time frame specified in such MOAs.

It must be mandatory and strictly adhered to by all parties. Failure by any of the parties to that MOA should be made to heavily compensate any breaches. There need to be a review of the current business model of the PNG LNG Project.

The review must reveal how exactly PNG entities and individual citizens are benefiting from all segments of the PNG LNG Project.
As it is, PNG is mostly benefiting from only one segment of the project while foreign investors take away much of the profits generated from the other segments.

This is because at the time of signing the project agreement the government then rejected outright the professional and technical advice in adopting the business plan. The LNG Project was and still is far important to the future economic health and well-being of PNG. It single-handedly underpins the future economic advancement of PNG.

This was fully recognised by then government and the technical team was task to deliver the project within the ambit of this objective. The technical team was convinced that the business model for the LNG Project had to be structured in the way, so that PNG and landowners were drivers of the projects, rather than mere bystanders, if the above objective was to be realised.

Under the business plan recommended by the technical team, The National Government, provincial governments, local level governments, landowners and other PNG citizens were to have fully participated through share equity in all segments of the project.

This means, under the aborted business model, various PNG entities and groups would have invested and benefit in all segments from upstream, pipeline, processing facilities, shipping and marketing. Unfortunately, this one-in-a-life time investment opportunities for PNG citizens was denied when the government opted to adopting a totally different business model. There were serious concerns and perception among various stakeholders that the originally well-intended ideals of this project was hijacked.

The Ministerial Committee on the LNG Project appointed by the National Executive Council totally ignored and ultimately rejected the business model recommended by the technical team.

Under the current model, the State, provincial governments and landowners are to participate ONLY at the UPSTREAM, by exercising their 22.5 per cent rights under the Oil and Gas legislation. Other than that they have no participation or interests in other segments of the project, namely pipeline, processing facility, marketing and shipping.

Under the current business model, the State and the landowners are complete bystanders, with no tangible control and ownership in the project. This business model defeats original Government policy ambition as well as political and economic aspirations of PNG.

If is it not too late and so there should be review into the business model of the PNG LNG Project to allow the National Government, provincial governments, local level governments, super funds, national owned businesses and individuals to buy shares in all segments of the project.

The current business model must be re-structured to enable maximum participation of government, landowners, and provincial governments, in all segment of the LNG Project.

Allow PNG and its citizens to retain the majority ownership of the complete PNG LNG project chain.

The government should also review the substantial tax exemptions given to the PNG LNG project. This government is in the best possible position to carry out a thorough review of all tax and fiscal exemptions granted to the developers of the PNG LNG project.

Among the concessions for review should include:

  • 30 per cent Corporate Tax rate;
  • Waiver of the 2 per cent Fiscal Stability premium;
  • Foundation Volume pf 10.5tcf;
  • State Carry;
  • Excise and Import Duty Exceptions during construction phase;
  • Special Tax Credits;
  • Applicable Interest to State’s back-in Costs; and
  • Oil to Gas Tax rate Conversion.

The concessions could well have resulted in losses of hundreds of millions of kina in State revenue. The government is morally obliged and duty bound to direct for full review of all major projects so that shares are floated for PNG owned entities and individuals buy into the projects. Then only can PNG citizens boasting of benefiting from resources found in their land and sea. Otherwise so-called landowners and PNG people are fighting among ourselves for bones and crumbs.

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Fighting at LNG site poses threat to workers: Police

PNG Liquefied Natural Gas Plant near Port Moresby, Papua New Guinea.Photographer: Richard Dellman via ExxonMobil Corp.

The National aka The Loggers Times | November 5, 2018

POLICE are concerned that bad blood between a group of Highlanders and locals at the liquefied natural gas site in Gulf over a sorcery-related killing is posing a threat to the company.

Provincial police commander Inspector Silva Sika said the killing at an LNG site village had led to frequent rows and fighting, making it unsafe for the workers.

The deceased was originally from Lufa in Eastern Highlands.

“Police will be deployed again to the site to settle the situation and protect others from outside (the province) working there,” Sika said.

He said relatives of the deceased had attacked the suspect’s brother at the Wabo sub-station village.

Earlier they kidnapped four locals using guns and bush knives and destroyed gardens and crops. Police had settled the matter but trouble started again. Police said they had to make arrests but after few weeks tensions rose again between the groups.

“I have done peace and agreements between the groups but it suddenly started again,” he said.

The deceased was found floating in the river near the village close to the LNG site.

At least one person out of 10 accused of sorcery has been killed and one-third were permanently injured, a joint study by three universities in three provinces revealed.

The research recorded 357 sorcery accusation cases from Enga, Bougainville and Port Moresby between January 2016 and October 2017.

There were 185 victims and at least 20 people killed, with a large number suffering permanent physical injuries. Australian National University Associate Professor Miranda Forsyth said the study was undertaken by the university, the PNG National Research Institute and Divine Word University supported by the Australian government through Pacific Women Shaping Pacific Development Programme.

Forsyth said of the cases identified in Enga, at least 37 per cent of the incidents resulted in killing through the use of torture, followed by seven per cent of cases in Bougainville and four per cent of cases in Port Moresby.

She said that four per cent of cases in Enga resulted in tribal fighting.

The study revealed that 63 per cent of the total in Enga resulted in major physical violence and so did 36 per cent in Bougainville and 31 per cent in Port Moresby,”

Sixty-seven per cent of the cases in Enga resulted in the burning of the accused, seven per cent in Bougainville and eight per cent in Port Moresby.

Other forms of accusation included forced imprisonment, damage of property, threats, minor physical violence and clothing removed.

The PNG government developed a comprehensive sorcery and witchcraft accusation-related violence (SARV) national action plan in 2015 to address the problem of sorcery accusation-related violence.

The Australian government is working in partnership with Papua New Guinea in all core areas through the Pacific Women Shaping Pacific Development Programmeand justice services and stability for development programmes.

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