But must clear court obstacles too

Peter Niesi
Co-venturers in Papua New Guinea’s bid to join the exclusive club of liquified natural gas exporters are already knocking on doors of potential financiers, thanks to a unanimous parliamentary support.
The national government needs up to US$1.94 billion to fund its 19.4 percent equity in the US$10 billion Liquified Natural Gas (LNG) Project. It could be higher if construction costs escalate.
So far, the state has set aside K600 million or US$300 million accumulated from past years’ budgets and supplementary budgets for the equity. That means they may need US$1.64 billion at least. The 2009 annual budget, if the Budget Strategy Paper 2009 is anything to go by, will reveal how the national government intends to finance this equity.
All co-venturers which include ExxonMobil with Esso Highlands Limited as operator, Oil Search Ltd, Santos, AGL, Nippon Oil and the state are highly enthused except AGL who is selling its shares—something potential investors have been advised to watch the Australian Stock Exchange closely on.
But while the US$10-US$13 billion project sailed past this major political obstacle in PNG’s 109-member chamber on September 18, on the same day, in the court precincts on the next block, a court snare was set by landowners.
The landowners from the petroleum and gas fields in Southern Highlands known as Hides, Angore, Juha, Kutubu, Gobe and Moran, led by Simon Ekande filed a writ of summons seeking a declaration from the national court that the LNG agreement signed on May 22, is illegal and of no effect.
The landowners' sentiments have been pretty graphic: “You are trying to take gas not from our land but from our hearts.’ Many of their leaders particularly Mendi Open MP Pr Isaac Joseph say the people feel that despite 17 years of oil flow and exports, Southern Highlands remains the same.
“They see a spiritual significance, fulfilment of a prophecy that they would one day light up the nation,” Pr Joseph says.
“But most of them are in the dark and anxious about the speed with which the LNG agreement was negotiated, endorsed and signed.”
Most of the Opposition members relaxed their stance following extensive briefings from the government led by Public Enterprises Minister, Arthur Somare and Petroleum and Gas Minister, William Duma.
Although a few of the MPs—particularly the outspoken National Capital District Governor Powes Parkop—want to know still what considerations are there for domestic gas sales and access.
With dwindling firewood access for fuel, the emphasis on clean energy and the general trend of escalating fuel costs, the visionary leader wants to see LNG used to fuel motor vehicles, in cooking in households and even to generate electricity in the nation’s capital, Port Moresby.
But Opposition Leader Sir Mekere Morauta’s Papua New Guinea Party led by the deputy parliamentary leader Francis Awesa snubbed the vote on nine pieces of legislations—mostly changes to taxation and fiscal laws.
Deputy Leader of Opposition and former Treasurer Bart Philemon took a cautious line—recognising the time-bound window of opportunity to obtain premium prices on PNG LNG Gas as well as concerns on sending negative signals to investors.
Philemon has reason to be—the recent World Bank report highlighting comparative low rating of doing business in Papua New Guinea compared to other countries.
Awesa, interrupted while debating one of the bills following Treasurer Patrick Pruaitch’s tabling and speech, reacted with description of MPs as “cheer leaders” to a handful of ministers in the driver’s seat when he highlighted the lack of consultations as potential constitutional breaches. Just about every response from government ranks were prefaced with a distancing from the “cheerleader” labelling.
The Imbonggu MP’s sobering stance was only excelled in intensity by reactions from the Public Gallery who loudly backed sentiments expressed by Tari-Pori MP, James Marabe who highlighted a long held sentiment to divide Southern Highlands into two provinces.
“No Hela Province! No Gas,” the men had yelled and swore as they were escorted out of the chambers on Speaker Jeffery Nape’s instructions.
But the court case, filed by Alois Jerewai of Jerewai Lawyers, is extensive enough without that to cause concern.
The landowners want the court to agree that there was a failure to consult and involve them prior to the signing of the agreement which breaches two parts of the Organic Law on Provincial Government and Local Level Government.
Alternatively, they want clauses within the agreement locking the deal between the state and its co-venturers declared illegal because it excluded the landowners and therefore breached the Oil and Gas Act.
They argue also that there was a vital omission in the agreement as it failed to have the National Economic Fiscal Commission conduct its own cost-benefit analysis before the signing in line with the Organic Law on Provincial Governments and Local Level Governments.
All these, they will argue, should be sufficient individually or collectively for LNG Gas agreement to be declared illegal, null and void, and having no force or effect.
But nothing is to be taken away from the government yet. On September 23, they came back with a 2008 Supplementary Budget of about US$280 million in which the Southern Highlands walked off with a lion’s share of US$41.2 million.
In what can only be conceived as a softening exercise, the province was given K39 million for three roads, a potential payout of K100 million in outstanding memoranda of association payouts, and K2.5 million for the creation of Hela Province. At least three of the 20 provinces—Manus, Simbu and Eastern Highlands—missed out completely.
That exercise, plus the fact that three Southern Highlands MPs—Ialibu-Pangia MP Peter O’Neill, Marabe, and the Governor of the Province Anderson Agiru—were directly involved in the negotiations may still bring the nation’s most lucrative project home.
However, much now depends on how much landowners and the provincial government stand to gain during the Benefits Sharing Agreement and how transparent this process is carried out and publicised for the masses.
Commercially, the co-venturers have moved onto Front-End Engineering Design with the state’s nominee for its stake yet to be determined, and the Environmental Impact Study as well as the Benefit Sharing Agreement likely to be, or already underway.
What it means is that until a Financial Investment Decision is reached, construction of the 700-kilometre pipeline from Juha to Kopi and then underwater (450 km) across the Gulf of Papua to Konedobu LNG plant and the various infrastructure required may be stories for coming issues of ISLANDS BUSINESS.