LNG Questions and Answers
Australia Network News
Papua New Guinea's Prime Minister, Sir Michael Somare, has congratulated Esso Highlands Ltd for successfully concluding financial arrangements that will enable the 15 billion US dollar PNG LNG project to proceed. Esso Highlands is the operator of the ExxonMobil lead project, which includes Oil Search and the PNG government as junior partners. This massive development has been almost 4 years in the making and is expected to double PNG's Gross Domestic Product. Sir Michael Somare says the weekend announcement of the conclusion of the project financing and major purchase agreements with four Asian customers is a major milestone in the government's efforts to build a vibrant economy.
Presenter: Jemima Garrett
Speaker: Paul Barker, Director of the Papua New Guinea's Institute of National Affairs
BARKER: Certainly Jemima, it is a major milestone and because its a 30 year project, it does provide a major backstop for revenue for the state, so it provides a major opportunity for the state to be able to fund in the long term a lot of the tasks, functions that it needs to perform.
GARRETT: Prime Minister Somare says that the landowners will receive between 15 and 20 Billion Kina over the 30 year life of the project. Is that right?
BARKER: Well, that's the benefit over the life of the period for the state, the project landowners, provincial governments, ten local level governments, so it has got to be shared amongst them all. But it is certainly a substantial amount of money going to landowners thats for sure.
GARRETT: There has been a complicated and a contested process of coming to the benefit sharing agreement. To what extent will all that money actually make life better for landowners?
BARKER: The past experience of large flows of money have been very mixed and we know that in many project areas there is not that much to show for it, so it is really going to depend on a lot of preparation, business development, support, a lot of awareness, and making sure that the whole community's involved and that it is not siphoned off by a small group of supposed leaders, who, will of course, be very eager to siphon off as much as they can for themselves.
GARRETT: Sir Michael Somare says the way the benefits will be shared between landowners, provincial governments and the national governments is unique and fair, would you agree with that?
BARKER: Certainly there is a broad range of benefits, there's the constitutional responsibility to make sure that the national government gets funds, because of the major responsibility to try to disseminate the funds throughout the entire economy, not just with the landowners, but certainly the landowners so long as all the right landowners are participating are major beneficiaries. It's the next door neighbours that we almost have to be particularly concerned about. You get whole communities where one group are landowners, the next group may be even from the same tribal group are not landowners, so we need to make sure that they are also substantial beneficiaries, that they are able to benefit from employment generation and related activities.
GARRETT: There has been a debate about whether the PNG-LNG project has got off too lightly on tax. Prime Minister Somare says the government has not provided any tax concessions and in fact has reintroduced the additional profits tax. Will the project pay enough tax?
BARKER: It would be difficult for me to assess that at this stage. I would have to analyse comparisons with other international forms. But certainly they have not got the concessions that, for example, one or two other major projects have in recent times when they have had ten year tax concessions.
GARRETT: Sir Michael Somare has said that the challenge for the government is to convert the benefits of the project to meaningful development that will improve the lives of Papua New Guineans. How is the government performing so far on that?
BARKER: Well certainly, that is the biggest challenge for the National Government and sub-national governments, right through to local level governments. Track record, we've got a lot of minerals and petro, well oil development over the last period of time and yet the services around the country and the state of the infrastructure are pretty well appalling. So in fact they have gone substantially backwards, particularly if you are living out in rural areas and remoter areas, you don't have services any more, the roads are not operational and a lot of the national resources have been sucked into national institutions and into a lot of expenditure on administration, international travel and things like this. So it does require a major mind shift and commitment by the government to reform the institutions. We have got just a recent report of 1,000 government entities, that's far too many entities if you like, but 1,000 entities of which only five according to the Public Accounts Committee have actually complied with basic accounting standards, reporting standards. So there are enormous sums of money that are washing around that are not being managed properly and accounted for properly in delivering basic services.
Presenter: Jemima Garrett
Speaker: Paul Barker, Director of the Papua New Guinea's Institute of National Affairs
BARKER: Certainly Jemima, it is a major milestone and because its a 30 year project, it does provide a major backstop for revenue for the state, so it provides a major opportunity for the state to be able to fund in the long term a lot of the tasks, functions that it needs to perform.
GARRETT: Prime Minister Somare says that the landowners will receive between 15 and 20 Billion Kina over the 30 year life of the project. Is that right?
BARKER: Well, that's the benefit over the life of the period for the state, the project landowners, provincial governments, ten local level governments, so it has got to be shared amongst them all. But it is certainly a substantial amount of money going to landowners thats for sure.
GARRETT: There has been a complicated and a contested process of coming to the benefit sharing agreement. To what extent will all that money actually make life better for landowners?
BARKER: The past experience of large flows of money have been very mixed and we know that in many project areas there is not that much to show for it, so it is really going to depend on a lot of preparation, business development, support, a lot of awareness, and making sure that the whole community's involved and that it is not siphoned off by a small group of supposed leaders, who, will of course, be very eager to siphon off as much as they can for themselves.
GARRETT: Sir Michael Somare says the way the benefits will be shared between landowners, provincial governments and the national governments is unique and fair, would you agree with that?
BARKER: Certainly there is a broad range of benefits, there's the constitutional responsibility to make sure that the national government gets funds, because of the major responsibility to try to disseminate the funds throughout the entire economy, not just with the landowners, but certainly the landowners so long as all the right landowners are participating are major beneficiaries. It's the next door neighbours that we almost have to be particularly concerned about. You get whole communities where one group are landowners, the next group may be even from the same tribal group are not landowners, so we need to make sure that they are also substantial beneficiaries, that they are able to benefit from employment generation and related activities.
GARRETT: There has been a debate about whether the PNG-LNG project has got off too lightly on tax. Prime Minister Somare says the government has not provided any tax concessions and in fact has reintroduced the additional profits tax. Will the project pay enough tax?
BARKER: It would be difficult for me to assess that at this stage. I would have to analyse comparisons with other international forms. But certainly they have not got the concessions that, for example, one or two other major projects have in recent times when they have had ten year tax concessions.
GARRETT: Sir Michael Somare has said that the challenge for the government is to convert the benefits of the project to meaningful development that will improve the lives of Papua New Guineans. How is the government performing so far on that?
BARKER: Well certainly, that is the biggest challenge for the National Government and sub-national governments, right through to local level governments. Track record, we've got a lot of minerals and petro, well oil development over the last period of time and yet the services around the country and the state of the infrastructure are pretty well appalling. So in fact they have gone substantially backwards, particularly if you are living out in rural areas and remoter areas, you don't have services any more, the roads are not operational and a lot of the national resources have been sucked into national institutions and into a lot of expenditure on administration, international travel and things like this. So it does require a major mind shift and commitment by the government to reform the institutions. We have got just a recent report of 1,000 government entities, that's far too many entities if you like, but 1,000 entities of which only five according to the Public Accounts Committee have actually complied with basic accounting standards, reporting standards. So there are enormous sums of money that are washing around that are not being managed properly and accounted for properly in delivering basic services.
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