9 March 2017

The Papua New Guinea liquefied natural gas (LNG) project is the largest resource extraction project in the Asia-Pacific region. Constructed at a stated cost of US$19 billion, it’s operated by ExxonMobil in joint venture with Oil Search and four other partners. The project extracts natural gas from the Papua New Guinea highlands where it is processed before being sent via some 700km of pipeline to a plant near the nation’s capital, Port Moresby... In February 2009, the economic consulting firm Acil Tasman (now Acil Allen) produced a report for ExxonMobil about the project’s impact. The report said the project has the potential to transform the country’s economy by boosting GDP and money from exports. These would increase government revenue and provide royalty payments to landowners. It claims the project could potentially improve the quality of life of locals by providing services and enhancing productivity. Workers and suppliers would reap rewards, as would landowners who would also benefit from social and economic infrastructure.

[T]he LNG project was able to begin operations after agreement was reached with landowners on the benefits that were to be delivered via the extraction and sale of the resource that exists beneath their land. After much negotiation, the PNG LNG Project Umbrella Benefits Sharing Agreement (UBSA) was signed in May 2009... but neither ExxonMobil, Oil Search nor any of the other joint venture partners are signatories to the UBSA. Rather, the agreement is between the Papua New Guinea state, various levels of government and the landowners themselves... In 2009, ExxonMobil agreed to pay 700 PNG Kina (approximately US$216) per hectare per year for land occupied by the LNG project, indexed to inflation. Disputes over ownership of that land have resulted in sporadic warfare over the past several years and dozens of deaths.

In August 2016, several leaders of landowning clans at ExxonMobil’s gas conditioning plant at the village of Hides...organised to blockade the facility and shut off the gas taps at several wells [and]  forced their way into the plant site before locking its gates and demanding that the government meet their ultimatum to honour the UBSA agreement... Papua New Guinea now faces a situation where it’s compelled to send its army to an area where a major resource extraction project has failed to deliver on its promises to landowners.