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    PNG LNG latest: Construction works forge ahead despite tensions and allegations of corruption

    Friday, April 29, 2011

    Controversy surrounding the PNG LNG project is intensifying with heightened security threats, unfulfilled landowner contracts and allegations of corruption causing increased tensions.  

    On April 12, security concerns were raised by the shooting of an expatriate Australian Oil Search employee at the Kutubu oil fields in the Southern Highland province. The expatriate was driving along the access routes to the project site when he was fired upon by thugs hiding in the bushes. The incident has raised alarm over the security of staff and management of Oil Search, which operates both the Kutubu and the neighbouring Hides gas fields. 

    Tensions in the region have also been high over failure to deliver long-promised catering and maintenance contracts, as well as outstanding payments to landowners. In late March, a landowners’ protest forced work at the Hides 4 site to be shut down. Further disruptions have been threatened unless contracts are negotiated. Outstanding payments of K170 million to landowners for business development grants, ministerial commitments and infrastructural grants have also led to work stoppages at Hides 1. In February, tensions peaked when over 100 landowners stormed Vulupindi Haus in Port Moresby demanding the government pay outstanding business development grants owed to them. Three Petroleum and Energy department officials were held hostage for half an hour before police intervened to rescue them.

    A mediation process between Esso Highlands Ltd, a state team and landowners, examining the legality of the PNG LNG Agreement and the ownership of oil and gas resources is currently underway. 

    Rising tensions around the PNG LNG project have been accompanied by the added controversy surrounding the findings of official misconduct against Prime Minister Sir Michael Somare. In late March Somare was found guilty of 13 charges of official misconduct after failing to lodge more than a decade’s worth of annual financial returns. The sentence, a 14-day suspension without pay, appears as little more than a ‘slap on the wrist’ for the incumbent PM. The Opposition has lashed out saying it is a mockery of the rule of law in PNG and gives confidence for others to follow suit. 

    More encouragingly, the PNG government has approved the establishment of a state working group to investigate the implementation of the Extractive Industries Transparency Initiative (EITI). The EITI is aimed at strengthening governance by providing greater transparency and accountability for receipts and payments associated with the extraction of oil, gas and other mineral resources. Jubilee Australia has been openly critical of the failure of the PNG government to sign the EITI, warning that until the EITI is signed, the positive economic and social projections around the LNG project will not be realised.

    The LNG project is expected to deliver its first shipment of gas by late 2014. Current developments have seen the first foundations poured for the LNG Plant. As development progresses, Jubilee Ausralia will continue to monitor the situation and provide regular updates.

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