Yesterday, the largest resources project in Papua New Guinea’s history moved a step closer, with the PNG government approving the Environmental Impact Statement for the vast PNG LNG project.

The project is being developed by ExxonMobil, Australian companies OilSearch and Santos, and — notionally — PNG’s state-owned company Petramin. It is anticipated it will cost more than $US11 billion ($A11.9 billion), and double the size of PNG’s GDP over its 30-year lifecycle.

The PNG government’s stake in the project is not controlled by Petramin but instead, effectively, by Arthur Somare, the Public Enterprises Minister and son of the Prime Minister Michael Somare. Control of the project has been handed to the “Independent Public Business Corporation”, in which Somare is said to be influential. IPBC’s role was underwritten by a $US1.7 billion loan from the Abu Dhabi government, brokered by Somare.

There is a seat on the IPBC Board for Transparency International PNG Inc, but it is currently vacant.

PNG has also refused to participate in the Extractive Industries Transparency Initiative (EITI), a set of international standards for publicly reporting revenues from oil, mining and gas ventures launched in 2002.

All this is not unrelated to Australian interests. The Australian government, in fact, has a key role. At least half, and perhaps more, of the $11 billion development cost will be met by various export credit agencies (ECAs), state-owned bodies that facilitate exports through insurance and loans. The Japan Bank for International Cooperation is providing $US4.3 billion for the project. The US and Italian ECAs are considering support. And sometime in the next couple of weeks, Simon Crean will take a submission from the Export Finance and Insurance Corporation to Cabinet proposing we provide $US500 million in loans for the project.

EFIC has invested in PNG before, of course. It provided significant support for the development of the environmentally disastrous Ok Tedi mine.

EFIC isn’t subject to anything like the same level of scrutiny that most public-sector agencies face. Its internal workings used to be subject to several FOI exemptions. The government’s recent FOI reforms have stripped some of those away, but its activities remain mostly out of public sight. According to local NGO Jubilee Australia, EFIC has — contrary to its own environmental policy — refused to respond to submissions about the environmental impacts of major projects it is considering supporting. Jubilee has written to Crean requesting that he reconsider EFIC support for the PNG LNG project, which is scheduled to be approved by the PNG government before the end of the year.

The people of PNG have seen a succession of major resource projects fail to dent widespread poverty since independence. PNG LNG, which continues to be dogged by disputes with local landowners who are supposed to also have a stake in the project, may well go the same way, with foreign companies, fly-in, fly-out foreign workers and local politicians potentially being the prime beneficiaries, all with the generous support of Australian taxpayers.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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