LNG in PNG: Rising Tensions

In mid-December, the government of Papua New Guinea (PNG) deployed military personnel to the country’s Hela Province in the southern highlands in an attempt to halt tribal violence and protect ExxonMobil’s $19 billion liquefied natural gas (LNG) project, located in the region.

The gas plant, known as PNG LNG, is country's biggest resource project and supplies some of the cheapest liquefied natural gas in the world to four major east Asian power companies: China Petroleum and Chemical Corporation (Sinopec), Osaka Gas Company Limited, the Tokyo Electric Power Company Inc, and Taiwan’s CPC Corporation. This gives the project some major stakeholders invested in its success, and should have led to significant foreign currency generation and job creation for PNG.

While the plant has not been the catalyst of tribal tensions, it has inflamed them, with the infamous “resource curse” latching itself onto local conditions. Hela Province forms the heartland of the Huli people. The Huli are one of the largest tribal group in PNG’s highly diverse population, consisting of around 100,000 of the country’s seven million people. The Southern Highlands region is also is also home to the Duna people, who number around 30,000. The Huli and the Duna are connected by a shared mythological heritage, along with the other main tribes of the region, the Tuguba, Opene, and Hewa.

The Duna accuse the Huli of abandoning the region’s rituals and traditions that are based around the conservation of the land. Instead, they see Huli collaboration with companies like ExxonMobil as pillaging the land. Furthermore, the creation of Hela Province itself in 2012, carved out of Southern Highland Province, was also a source of contention between the tribes, with the Duna seeing it as a Huli-driven project that has the potential to disenfranchise the Duna and other tribal groups in the region.

On top of these tensions there are serious concerns about the lack of local benefits the region is seeing from the PNG LNG project. With a project of this size, built by such a large corporation, there comes an expectation for tangible improvements to the region’s infrastructure in the form of roads, schools, and hospitals. This has called into question the country’s Mining Act, with former Prime Minister Sir Julius Chan stating that the current royalty arrangement for resource extraction "completely screws the landowners and provinces." Chan claims that "our people are getting almost nothing from the huge amount of wealth coming from their ground; it all goes to the company and the national government, and none of it comes back to the people.”

Analysis by the Development Policy Center at the Australian National University estimated that in the first quarter of 2015 PNG mineral exports generated close to $1 billion. However, government revenue from mineral exports was only $5.7 million, amounting to around 0.5 percent of the mineral worth. By mid-December over 200 ships of LNG had been exported from PNG, yet there had been no royalties paid to the regional landowners in Hela Province.

Alongside the outstanding royalties owed to the local landowners, currently assessed at around 1 billion kina ($288 million), there was also an agreement reached in 2009 for local landowners to have the option to purchase a 4.27 percent equity in the project. However, the government-owned company Kumul Petroleum Holdings has withdrawn its offer to finance the stake. This has raised the ire of locals who have focused their hostility toward politicians as well as each other. These groups are now threatening to physically attack the LNG plant over the government’s failure to pay promised royalties and provide finance for equity in the project.

In a major concern for the PNG government, there has been a significant buildup of weaponry in the region, especially in areas where the state is weak. Due to this, alongside the deployment of military personnel into the region, the government has launched an amnesty for unlicensed firearms until February 2017, after which the police and military will actively search the province for illegally obtained firearms.

With national elections scheduled to take place in late June and early July 2017, the Papua New Guinean government is hoping that the military deployment will stabilize the region quickly. Prime Minister Peter O’Neill commented that "[t]hese problems have the potential to impact on the upcoming election as well as the operation of important projects in the area. Police will have full powers to ensure law and order and to deal with people who seek to cause trouble. This includes the immediate arrest of people seeking to initiate violent acts or make threats against government officials or projects in the province."

Despite the escalation of tribal tensions in the PNG highlands that the PNG LNG project has brought, the country’s political leaders remain convinced that the country’s abundance of natural resources is the key to its development into a prosperous and modern nation. Yet with the sheer complexity of PNG society – over 800 languages spoken within a population of seven million just being the tip of its cultural diversity – creating a Western-style nation-state seems a highly complicated enterprise to undertake. The resource curse seems bound to further complicate the attempt.