Keith Jackson & Friends: PNG ATTITUDE

Benefits of LNG not passed on to wider population

BY JO CHANDLER
THE AGE (MELBOURNE)

THREE YEARS AFTER WORK BEGAN in earnest building the hardware to extract and pipe gas from the mountains of Papua New Guinea, initiating what is spruiked as a game-changing bonanza for the fragile nation, many local people remain excluded, frustrated and suspicious about the $US16 billion project.

The PNG LNG (liquefied natural gas) project has already utterly changed their lives, according to an academic investigation.

Failures to better inform the local Hela community about the project, together with flaws in the critical processes of identifying landowners entitled to a share of the windfall and concerns about how the benefits will ultimately be shared, are identified in the new report as potentially damaging concerns in a region infamous for volatility and violence.

Causing particular anxiety was that the failure - blamed largely on the PNG government - to facilitate a full landowner identification process and legislate around creating landowner companies threatened to ''undermine the LNGP and future progress''.

The report - launched in Canberra yesterday by parliamentary secretary for Pacific island affairs Richard Marles - says that although the LNG project represents a significant opportunity for PNG, one which has already yielded benefits for some in local jobs and a boosted economy, these gains are at risk of being undermined if local disenchantment and simmering social tensions ignite the powder-keg Highlands region.

The report lays out a detailed examination of some of the challenges to development in a country such as PNG.

Despite its bountiful resources - PNG is an island of gold, floating in a sea of oil, surrounded by gas, so the ritual boast goes - in terms of exploitation the result over the years ''has at best been mixed, with few long-term benefits being passed on to the wider population'', the authors write.

The reason PNG has struggled to capitalise on its natural abundance, and in some cases has ''suffered serious environmental and social harm in the wake of resources development'', is due to a mixture of factors, foremost among them failures of governance - ''the absence of good institutions and sound economic policy'' - and the fragility of vulnerable indigenous populations, many of whom struggle with the social fallout of the roller-coaster rush to modernity that comes in the wake of mining and logging operations.

Hela Province, which is the crucible of the nation's economic hope, presents a formidable set of hurdles to any potential investors and developers, the report explains.

Geographically it is remote and wild country - a landscape of steep mountains, choking forests, isolated subsistence gardens and villages connected by few roads and broken bridges. It also has some of the lowest literacy and highest levels of child and maternal deaths in the nation.

The report argues that the key to the LNG project achieving its potential to deliver benefits to the community - without overwhelming social costs - requires the resources companies, the community and the government to ''accept and discharge wider responsibilities beyond the narrow remit of self-interest.

''The role of resource development projects such as the LNGP should not just be income generation,'' the report argues, ''but the promotion of wider human development aspirations such as improved livelihoods, greater access to education, better nutrition and healthcare, surety against crime and physical violence, cultural and political freedoms and a feeling of participation in community life.''

''A unique partnership has to be built if this very important project is to succeed,'' said lead author Dr James McIlraith of New Zealand's University of Otago.

Given the nation's ongoing political crisis, ''in the immediate short term, the government doesn't have the capacity, it's going to have to be Esso and the churches who need to pick up the slack to some degree.

''I think Esso are a bit reluctant to do that - they have a business orientation - but these are very unique and challenging circumstances, and to succeed with this project, both in terms of its business and profitability, and to succeed in the community, Esso has to take that different track.''

A spokesman for Esso Highlands said the report identified many issues and challenges that were already being actively addressed.

''We are committed to developing the PNG LNG project in a manner that protects Papua New Guinea's natural and social environments, while providing economic benefits to its citizens.''

The research was sponsored by six partners - the PNG Church Partnership Program, ChildFund, Oxfam, the Melanesian Institute (a research and training body in Goroka), the University of Otago, and Jubilee Australia.

PNG CEOs optimistic about business prospects

PAPUA NEW GUINEA'S MAJOR EMPLOYERS are optimistic about the year ahead, with almost 90% expecting higher profits in 2012, according to a major new business survey.

The PNG 100 CEO Survey, conducted by Business Advantage International and published in the new edition of Business Advantage Papua New Guinea, asked the CEOs of PNG’s major companies across all sectors of the economy to answer questions about their profits, future investment and employment plans, and the key issues facing their businesses.

Higher profits expected. The survey findings show the country’s major employers are bullish about the year ahead, with almost 90% of respondents expecting 2012 profits to exceed those of 2011. Remarkably, none of those surveyed expected a decline.

This statistic is all the more impressive when the companies’ 2011 performances are taken into account: two-thirds of respondents said their 2011 profits had exceeded expectations.

Greater investment. There is evidence from the survey that these stronger-than-expected profits are being ploughed back into business. 57% of respondents indicated that their own investment in new plant, equipment and other assets would increase in 2012, with a further 25% saying investment would at least match 2011 levels.

More jobs. There is also good news on the employment front, which is especially welcome given PNG’s low levels of formal employment. Just over 50% of responding CEOs said they were expecting to increase their headcount during 2012, with a further 40% saying their staff numbers would remain steady.

Critical issues. While the survey reveals a positive picture of corporate growth, there are undoubtedly some major issues facing PNG’s corporates. We asked PNG’s top CEOs to rank various business issues on a scale from 1 to 5, where 1 meant the issue was not relevant to their business and 5 meant it was mission critical.

The four most critical issues were, in order: PNG’s skills shortage; security/law and order problems; getting access to necessary expertise; and the lack of reliability of PNG’s state-owned utilities.

“Overall, the business issues uncovered by the PNG 100 CEO Survey are not a big surprise to those familiar with PNG’s business environment,” said Andrew Wilkins, Publishing Director of the Business Advantage International.

“What may surprise many, particularly those overseas, is that PNG’s top corporates are flying high in the face of such challenges.'”

Fears election violence could hit LNG project

BY JEMIMA GARRETT
RADIO AUSTRALIA

THE HEAD OF PAPUA NEW GUINEA'S $15 billion dollar ExxonMobil-led liquefied natural gas project says he is concerned about the potential for violence during next month's elections.

PNG LNG Managing Director Peter Graham has told a business forum in Brisbane that exports are set to begin as planned in 2014.

But he says he's concerned about the impact of electoral violence, and they have been planning for the risk of election violence for 12 months.

"We put a lot of effort with our contractors into preparing our camp sites, security around the campsites, ensuring that if the Highlands Highway were cut off by some protest or other, that we have stockpiled sufficient food and fuel and medical supplies and we have arrangements in place to fly stuff in if we need it," he said.

Much of the PNG LNG Project is located in volatile highlands provinces where a rapidly growing population and easy mobile phone communications is exacerbating the risk of conflicts escalating into large scale fights.

Mr Graham says with 16,000 staff in the field he cannot afford to have them unable to work.

"We can't afford to have people standing around for a day, or two days or a week if something should go wrong," he said.

"So we're pretty confident all of those plans will help us get through.

There's been speculation about the expansion of the PNG LNG plant at the plant just outside Port Moresby to double capacity.

With recent good exploration results, Mr Graham is no longer ruling that out.

"In order to install another train, similar to the trains we have today, we probably need about four or four and a half trillion cubit feet of gas," he said.

"That's about half of what we have today for the existing project ... our focus today is on delivering this project first.

"We are looking for additional gas to accumulate. It's going to take some time and some further drilling and a lot of expenditure to prove up gas for another one or two trains."

InterOil's LNG project under threat from government

BLOOMBERG

THE PAPUA NEW GUINEA GOVERNMENT has put InterOil Corp on notice that it will cancel its proposed liquefied natural gas project.

A notice from the Department of Petroleum and Energy given to InterOil through an “unofficial channel” said an agreement to build the $6 billion plant will be cancelled.

InterOil will meet with the government this week to discuss the project, its chief executive officer Phil Mulacek said.

Mulacek said the project is caught in a political “silly season” with PNG due to hold parliamentary elections in late June.

“The prime minister’s office has not shown any intention to cancel the project and we intend to fully abide by the terms of the 2009 agreement,” Mulacek said.

The LNG plant is being built adjacent to InterOil’s refinery and is expected to begin liquefaction by 2015. The company has already spent $81 million on its construction.

Stop making buai traders the scapegoats

THE NAMORONG REPORT

THERE APPEARS TO BE a systematic crackdown on one of Papua New Guinea's most economically and socially integral trades, buai [betel nut].

Assistant Police Commissioner Francis Tokura issued an order last week for policemen to remove all vendors from the streets of Port Moresby. [See also this earlier story in PNG Attitude].

The deep disrespect for the rights of PNG's self-employed was revealed by the heavy-handed, abusive behaviour of the police as they broke up the buai markets.

We do not commend Asst Commr Tokura for his "efforts to clean up Port Moresby".

If you want to clean up Moresby, don't look at the buai traders but at the government.

PNG street traders are scapegoats of a corrupt system.

Think about it. The litter issue arises through inefficient public administration - isn't the government paying someone for garbage disposal?

And if markets are a magnet for crime, it is because too many of our youths are let down by a system that is profit rather than people driven.

The buai sellers and their colleagues in our markets are entrepreneurs, not criminals. If you are making up to K500 a day, you're unlikely to go out and steal handbags afterwards. So why are we treating them as criminals? 

The informal economy appears to be expanding as more Papua New Guineans shake the delusion that being a buai trader is socially unacceptable.

Recent research found urban Papua New Guineans are quitting their 9-5 jobs as they realise the buai trade offers more lucrative prospects and better social security than the so-called formal economy.

As it expands, the market infrastructure struggles to accommodate its growth, resulting in more litter and overcrowded markets.

But oppressing and removing markets is not the answer, because the informal economy is really the People's Economy, and in light of the absence an even slightly superior alternative, it will continue to grow and thrive.

It is also, unlike the formal economy's extractive-obsessed sector, economically and socially sustainable. We know the profits made from using our natural resources stay in our communities.

Forget the hype about the LNG-driven economic boom: the People's Economy offers PNG (and the Pacific) a sustainable future (just as it has sustained our peoples for 50,000 years).

The government and police, and all of us, need to change their attitudes to street markets from one of disdain to support. Only with adequate support for our nation's most vital traders will the social debris be cleaned up.

For one example, look at this example in Durban, South Africa. The result is one of the most successful dual economic and tourism ventures in the country.

Change your attitude. Stop looking at buai traders as a problem.

They are, in reality, one of the few positive examples in a city and country where corporate greed in the formal economy - the driver for our government and therefore our police - really is turning our streets into ghettoes.

Minerals galore! Bright resource prospects for PNG

OXFORD BUSINESS GROUP

A SERIES OF SIGNIFICANT mineral finds in Papua New Guinea have highlighted the role exports are set to play in the nation’s economic future. However, there have been calls from industry players and opposition officials asking the government to do more to ensure revenues stay in the country.

In mid-April, state-owned Petromin announced that it had found a 364-metre intersection of porphyry copper, molybdenum and gold mineralisation at its Ipi River prospect, located 50 km north of its Tolukuma gold mine in Central Province.

In the same month, Australia-based Indochine Mining announced that gold and silver finds at Mount Kare had underlined the “outstanding potential” of the project to become one of PNG’s next major mining operations.

Officials also revealed that Kula Gold’s Woodlark Island project, which has estimated reserves of 700,000 ounces, was on track to start producing in 2014.

Also in April, Nautilus Minerals of Australia announced that it had obtained a license from PNG to mine a site the size of 21 football fields under the sea. The company hopes to develop and expand undersea mining to obtain copper, gold, silver and zinc from the seafloor.

These recent finds and progress underline the significant contribution metals are set to make to PNG’s growth in the coming years. In 2010, activities directly attributed to mining comprised 21% of domestic revenues, while GDP is projected to grow 8% this year.

At the same time, concerns over the environmental impacts of mining and foreign miners over-exploiting PNG’s resources have led to calls for the country to tighten its tax regime. Observers have called for the country to emulate Australia’s controversial mining tax, which will levy 30% of the “super profits” from corporations mining iron ore and coal.

The government has proposed legislative reforms to increase domestic involvement in mining projects, with deputy prime minister Belden Namah saying in February that the Mining Act will be reviewed to increase landowner participation in mining projects. However, Namah’s plans were met with a strong backlash from industry players and opposition officials.

In February, the IMF echoed these concerns, stating the resource sector could make a larger contribution to public revenues. It recommended that the government strengthen its current means of revenue collection, reinforce the internal revenue and Customs services, streamline tax concessions and apply the additional profits tax to mining activities.

The government’s grip on mining revenues will come under more scrutiny as speculation grows over the potential of the Wafi-Golpu copper-gold project, which Marian van der Walt, the investor relations manager at South Africa-based Harmony Gold Mining, in March described as the “find of the century”.

Prime minister Peter O’Neill stressed in March that the revenues from Wafi-Golpu will, like those from the $15.7 billion Exxon-led PNG liquefied natural gas project, be carefully managed by the country’s Sovereign Wealth Fund to ensure that they benefit development in infrastructure and education.

To address the multiple factors limiting investment in the mineral sector, observers say stronger political will is needed for resources-driven economic growth to translate into real development.

“Public sector weaknesses and the extent to which corruption has infected this sector will be a real challenge in capitalising on this opportunity,” said Ian Kemish, Australia’s High Commissioner to PNG, in March. “Political stability will also be very important.”

Chinese worker exposes Ramu’s dodgy bunch

BY MARTYN AWAYANG NAMORONG

IT’S NOT OFTEN one gets insights into how the Chinese do business in Papua New Guinea. And this is the moment I’ve been awaiting for six months.

The delay has been due to the translation of a blog published by a Chinese worker who left the Ramu Nickel Mine rather disappointed.

The delay also has been due to ethical debates as to whether extracts should be published at all, given the possibility of this young Chinese blogger facing negative repercussions back home.

This kid has got guts all right, publishing such a controversial piece in China.

It provides insights into the bullying and corruption at MCC’s Ramu nickel mine and highlights China’s global economic agenda of primitive accumulation and neo-colonialism.

It also reveals that not all Chinese who come to work for MCC are bad and those with a moral conscience leave Ramu Nico rather disappointed.

Those who do remain seem to be some of the most corrupt mine officials and workers.

Later today I’m presenting more material at a lecture I’m giving to students at Divine Word University in Madang and publishing more details online on the Namorong Report.

Boera: coastal village on an economic joyride

BY OALA MOI

BOERA VILLAGE located on the coast about 30 kilometres west of Port Moresby, is a Motuan village on an economic joyride to destination anywhere - courtesy of industrial and commercial developments taking place on the land and sea surrounding it.

They are types of development unprecedented in the region. And not many people are aware that, because of this, Boera’s land area under customary ownership has been greatly reduced.

The diminishing customary land area is a reality that a land custodian in an average clan in Boera has to grapple with when faced with a decision to distribute or register title over customary land. Add to that a people who are not used to the metropolitan lifestyle that awaits them with open arms.

To Boera’s north and north-east is state land which became freehold after its acquisition by agreement in 1908 and 1915. In 2007, the State acquired two portions through a process of compulsory acquisition thus freeing each one from their leaseholders.

Ex-portion 152 was divided into portion 2456 and portion 2459 respectively. Portion 2456 is the western half of ex-portion 152. It was granted under a 99-year lease to Esso Highlands Limited to develop a petroleum processing facility for the Exxon Mobil-led PNG LNG Project.

Portion 2459 is the eastern half of ex-portion 152 which is not part of the PNG LNG Project and presumed vacant land.

Portion 11 is the latest State portion slated for development, and another indication that Port Moresby city is expanding this way. There are already unconfirmed reports that local landowner company, Boera Holdings Limited, is planning to commission the construction of a satellite township development on the 155-plus hectares of land.

It’s aptly named Edai Town - after Edai Siabo, the inventor of the lagatoi vessel prominent in the Hiri trade and Motuan folklore - the proposed township comprises a total of 791 allotments.

Located near Boera is another state lease, portion 2174C. It is where a high frequency radio transmitting station owned and operated by Telikom PNG Limited can be found.

In July 2004, customary landowner representatives from Boera signed a memorandum of agreement allowing construction of the station, and annual land lease rental to be withheld by the State due to a dispute between signatories over individual land boundaries within portion 2174C.

The dispute was transferred to the Central Local Land Court and to date this has not been resolved.

There are developments at sea as well.

Portion 2456 borders with another state lease, portion 2457. Portion 2457 is a strip of land (foreshore) between portion 2456 and the ocean. Portion 2457 is required for the processing facilities and for access to portion 2458, which lies between Boera and Papa. Portion 2458 is the offshore area required by Esso Highlands Limited for the construction of a pier and other pipeline facilities for the export of liquefied natural gas.

Portion 2458 is over 900 hectares of sea and seabed. Until 2009, it was a traditional route or fishing spot frequented by local fishermen. But like portion 2456, Esso Highlands Limited also holds 99-year leases over portions 2457 and 2458.

Although it is not the first time Boera people have been deprived of fishing, hunting, water, and gardening rights, pressure from issues like population growth, project-related labour movement, and urbanisation will accelerate a change in the cultural behaviour and thinking of Boera villagers through contact with another culture.

The effect of post-contact acculturation was steady for the past 100 years and has certainly picked up with the industrial and commercial developments.

How are Boera villagers managing with this process of acculturation post-2009? There is no comprehensive study.

Coral Triangle fish privatisation plan opposed

BY MARVYN N BENANING
MANILA BULLETIN

AN ALLIANCE OF SOUTHEAST ASIAN fisheries groups is opposing a plan of the member-states of the Coral Triangle Initiative (CTI) to forge public-private partnerships ostensibly to protect the centre of global marine biodiversity.

The Southeast Asia Fish for Justice (SEAFish) renewed its appeal for officials of the Coral Triangle [Philippines, Indonesia, Malaysia, Papua New Guinea, Solomon Islands and Timor Leste] not to establish marine protected areas in the 6-million-square-kilometer waters of the Coral Triangle without consulting millions of fishermen engaged in subsistence fisheries.

Fisheries, agriculture and environment ministers from the six countries are actually seeking financial support from the Asian Development Bank, the key financial backer of the CTI.

SEAFish has 16 member-organisations, 14 of which are non-government organizations and two national fisherfolk federations from within and outside the region.

SEAFish claims that in Southeast Asia, between 25 million and 35 million people are directly engaged in fisheries as a livelihood. Moreover, at least 365 million people depend on fishery products for food and protein intake.

It adds that assessments of the quality of ecosystems that fishery industries rely on show that approximately 55% of the coral reefs in the region are seriously damaged and 75% of formerly existing mangrove habitats have disappeared.

For SEAFish, the four major threats on fishery resources and ecosystems are: rapidly growing populations; diminishing natural resources; increasing trade linkages and the facilitation of extraction and trade of fishery commodities for international markets, and; weak domestic governance systems.

Speaking on behalf of SEAFish, Ruperto Aleroza said the ADB and other agencies involved with CTI should replace its current approach with community-based coastal resource management to ensure the conservation of the marine resources in the Coral Triangle while assuring the participation of small fishers and fish farmers in fisheries management and achieve inclusive growth.

First sea-floor mine signs first customer

PHYSORG

NAUTILUS MINERALS, WHICH IS LISTED on the Canadian and London stock exchanges and has offices in Australia, has said the Tongling corporation has agreed to buy 1.1 million tonnes of sulphides per annum from its Solwara 1 undersea mine over a three year period.

The project, in the minerals-rich Manus basin of PNG's Bismarck Sea, is claimed by Nautilus as the world's first commercial sea-floor mine, and is slated to begin production late next year.

"We have now closed the value chain on the project, established our first customer for seafloor massive sulphides and look forward to building a long-term relationship with Tongling," said Nautilus CEO Stephen Rogers.

Rogers said the securing of Anhui-based copper giant Tongling showed the "considerable interest in the high-grade massive sulphides being found by the emerging sea-floor resource production industry."

Located about 50 kilometres north of New Britain's port city of Rabaul, Solwara 1 is a deposit of what is known as "sea-floor massive sulphides" - rocks containing high grades of copper, gold, zinc and silver.

The deposits form at hydrothermal vents, which spew the minerals from fissures in the Earth's crust, and the Manus basin is a lucrative site because there are active seams at relatively shallow depths.

Sea-floor mining is a new industry that has, until now, been little explored due to the abundance of untapped mineral sources on land and the unknown risks associated with undersea environments.

But Nautilus believes up to one-third of the world's minerals could eventually come from the sea floor, with land reserves being run down and demand ramping up for resources, particularly from China.

With the encouragement of the government, Chinese companies have moved to globally source raw materials needed to fuel the world's second largest economy.

Remote-controlled robots will drill for sulphide deposits on the rocky ocean bed 1,600 metres (5,250 feet) below sea level and a separate "collection" machine will pump the material to a support vessel at the surface.

The sulphide slurry will then be dewatered for transport to Rabaul where it will be shipped to China.

The robots were specially designed for Nautilus based on machines in use in the deepwater oil and gas, terrestrial mining and marine dredging industries, and are currently under construction.

Nautilus said Tongling would import the sulphide concentrate into China where it would be processed into copper concentrate for in-house smelting, with the purchase price to be determined by "the quality of the copper concentrate produced."

PNG has granted Nautilus a 25-year mining permit for the site, expiring in 2035, and the mine is targeting initial production of 1.2 million tonnes per year.

Resources-rich PNG is on the cusp of a huge resources boom, led by a $15 billion LNG pipeline project that could transform the Pacific nation.

We’ll ‘fast track’ Panguna says new chairman

ESBC RESEARCH

THE LANDOWNERS OF THE PANGUNA Special Mining Lease Association have elected their new board of directors.

And in his first statement, new chairman Chris Damana [pictured] affirmed that the Association will ‘fast-track’ the re-opening of the Panguna copper and gold mine.

Only two landowner associations are still to elect their leadership.

Once these elections are held, Panguna landowners are expected to vote for a mutual association which will be an umbrella body representing all Panguna landowners.

This group will conduct negotiations on the new Bougainville Copper Agreement. The European Shareholders of Bougainville Copper understands that this will take place within the next weeks.

Chris Damana is one of the most shining personalities in Panguna and will also run for a seat in the national parliament in the upcoming June elections.

ESBC president Axel G Sturm congratulated Mr Damana and his colleagues Jo Avero, Denis Nasia and William Basiku and wished them wisdom and good luck in their ambitious task.

Lihir production woes weigh on Newcrest

BY PETER KER
SYDNEY MORNING HERALD

POOR PERFORMANCE AT THE LIHIR MINE in Papua New Guinea was a major factor forcing Newcrest to downgrade its annual gold production target for the second time in six months.

Newcrest Mining boss Greg Robinson has defended the standard of his company's due diligence, despite Lihir continuing to disappoint.

The downgrade sparked another round of market punishment for Australia’s biggest listed gold miner, which hit its lowest share price in more than three years.

Newcrest acquired Lihir 18 months ago, and chief executive Greg Robinson said his company's due diligence had identified some of the problems.

Mr Robinson said he did not expect any future impairments against Lihir and said the asset offered tremendous growth potential.

Business forum: Bad wine & food for thought

BY STEPH CARTER
YOUR COMMONWEALTH

FOR THE EXPAT COMMUNITY in Papua New Guinea’s budding capital, Port Moresby, bad imported wine and dynamic debate is to be expected for any successful gathering.

And in the spirit of ‘Australia Week’, a series of events for all things Australia in Moresby, the High Commission and its resident crowd of diplomats and AusAID officials were offering just that.

Having recently begun my career in aid and development, the High Commission’s Australia Week forum on business and development in PNG and the Pacific was a chance to listen and learn from experts at the development coalface.

For the assortment of diplomats, development consultants and business representatives also attending, this was the ideal platform for high-level discussion concerning PNG’s social and economic development landscape. With the government elections coming up next month, the timing could not have been more perfect.

Social and economic development was discussed in equal measure. Speaking on behalf of the Cairns Institute, based out of James Cook University, Professor Hurriyet Babacan advocated passionately for a more equitable and holistic approach to development across PNG and other areas of the Pacific.

Acknowledging the resource boom currently taking place across PNG’s regional provinces, Professor Babacan warned of the dangers that this purely marked based development approach may have for social and political equality.

While global companies are lining up to extract their fair share of petroleum, oil and mining natural resources from the country’s fertile soil, according to Babacan this may not translate into well-being for the community.

“This is fragile, and could easily be reversed. We need to come back to the notions of holistic economic development,” the professor said.

Drawing on ideas put forward by Nobel Prize winning Economist Amartya Sen, Babacan explained how to “take a wiser approach to economic development.

Economic development viewed as freedoms – political, economic facilities, social opportunities, transparency guaranteed, and protective security.”

Also on the panel, the Hon Richard Marles, Australia’s Parliamentary Secretary for Pacific Affairs and Foreign Affairs, highlighted PNG’s existing political challenges and successes.

When asked how the country’s recent political instability would affect those companies wanting to invest in the resource boom, Marles spoke of the marked improvements occurring in and around Port Moresby.

“Corruption and law and order have been issues that the PNG government is seeking to address,” he said. “There’s a lot that’s positive that we can take from the way in which things have been handled here. By and large, issues have been handled politically. By and large, issues have been handled through the branches of government, and through the judiciary.”

Marles also highlighted PNG’s improving policy-making mechanisms, and the positive impact that this improvement is having on key social and development issues.

Speaking to an audience which largely composed of business representatives from oil, mining and gas companies active in the country, this forum certainly offered much food, and indeed bad wine, for thought.

B'ville stoush: today's politics or history’s legacy?

BY KEITH JACKSON

A PUBLIC DISPUTE HAS ERUPTED between Kris Lasslett [left], an academic specialising in the social and political impacts of mining, and Axel Sturm [right], the president of the European Shareholders of Bougainville Copper (ESBC).

It all began when Lasslett wrote of Sturm that he “needs reminding the greatest threat to BCL’s [Bougainville Copper Ltd] future remains its unacknowledged past”, contradicting Sturm’s view that the big problem is PNG’s current political uncertainty.

Now Dr Kris Lasslett is a bright, highly qualified and interesting bloke. He graduated from the University of Technology Sydney in 2004 with a first-class honours degree in law and a BA in communications. He went on to complete a PhD at the University of Westminster in the UK.

Dr Lasslett lectures in criminology at the University of Ulster and his research focuses on the political economy of state crime and civil conflict. He has conducted extensive field work on the Bougainville crisis in Papua New Guinea, and is researching mining, conflict and civil society.

In his article, Lasslett wrote:

Despite revelations aired on SBS last year, which evidenced BCL’s complicity in the brutal security force operations on Bougainville, BCL and the ESBC continue to play down the company’s instrumental role in the conflict.

If the ESBC wish to restore the integrity of BCL, then they should forward the following demands to BCL’s Chairman and Managing Director Peter Taylor:

-- BCL must publicly apologise for its evidenced role in the Bougainville conflict.

-- In an act of goodwill BCL should publicly disclose the depth of its involvement in the security force operations on Bougainville. This public disclosure should document the logistical support BCL supplied to the government’s security forces between December 1988 and March 1990. It should also reveal the relevant conversations that took place between the BCL management and senior state officials during this period.

-- BCL should demand that Rio Tinto – its parent company – cease contesting litigation taken by Bougainvillean landowners in the US, and fully compensate those victimised by the security forces using BCL property/facilities.

-- BCL should immediately remove from its Board of Directors, Sir Rabbie Namaliu who was appointed in March 2011. Sir Rabbie Namaliu was the Prime Minister of Papua New Guinea during 1988-1992. Under his Prime Ministership the Papua New Guinea security forces – in an effort to reopen the mine – executed and tortured civilians, systematically destroyed villages, and imposed a blockade on Bougainville, which included the denial of humanitarian aid. It is astonishing, in light of these facts, BCL would appoint Sir Rabbie Namaliu to the Board of Directors, and that the ESBC would support this decision.

As the last ten years has proven, Bougainvilleans are a forgiving people. But they will not suffer corporate intransigence lightly. If BCL comes to the table and publicly acknowledges its role on the Bougainville war, perhaps the healing process can begin. Only then will BCL shareholders find the certainty they demand.

Axel Sturm was outraged. In a public letter to Lasslett his opening salvo of “your disgraceful lampoon is remarkable” was quickly followed by:

PNG: What might the military be thinking?

BY REGINALD RENAGI

THERE ARE SEVERAL very effective ways to totally shut down Papua New Guinea apart from having these street protests outside the parliament or Morauta Haus but I will not outline them here for obvious reasons.

When demonstrations happen, a national security alert is announced. Next the law enforcement agencies go into an overdrive to contain the protest before it makes the public suffer longer than necessary.

There are strategies any pressure group stakeholders can use but they must be well planned, coordinated and executed at the same time in strategic locations to have the desired effect right across the whole country.

What is being done now outside parliament or at Morauta Haus is only temporary.

There are no escalating strategies by the unions, civil society and a handful of lawyers. The protests will not be sustained if the pollies want to be smart and stubborn.

So the protest organisers need to be smart and also play hard ball by making the pollies concerned that the longer the city shut-down goes on, the worse it will become.

They have to work out how effective they cab make their message so government and parliament relent and make a decision favourable to all parties.

The plan must be sustainable, but are the protest leaders willing to do that (varying risk levels) to change the government before the polls?

What if during this period of confusion (political impasse and public discussion of recent new bills by parliament), the military in joint effort with the police decide the time is ripe now to take control of the government and run the country like happened in Fiji?

Who is going to stop this? No one, because whoever has the gun has the power to do anything they like, as has been proven before.

What is even worse is that the government or parliament does not have a contingency for this eventuality after what happened in March 1997 (Sandline military mutiny and Operation Rausim Kwik).

There are many variables I could go into here, but most readers will get my drift and I do not want anyone getting funny ideas to start some funny business now to get rid of a regime who promised to do more than the last Somare regime pre August 2011.

But if nothing is done now by the current government something has got to give. We all don’t want to even guess what this something is.

PNG economy depends on government commitment

OXFORD BUSINESS GROUP

PAPUA NEW GUINEA’s recent surge in natural resource projects has had a spin-off effect on other sectors, thus giving the country a positive near-term outlook for its economy, which is expected to see GDP growth reach 8% this year.

However, the government has been advised to tighten its management of revenues from mining and natural gas projects, as well as curtail spending to ensure expansion remains stable moving forward.

In February, the International Monetary Fund said PNG continues to see high growth due to elevated commodity prices and the construction of a liquefied natural gas project, with the benefits seen in the construction and transportation sectors.

The IMF noted this was the 10th year of uninterrupted economic growth, but added that by 2013, growth will likely dip to 4%, as construction winds down and output at maturing mines declines.

The IMF’s confidence is mirrored in the latest regional review by the Asian Development Bank, which noted in March that the economy continued its strong performance during 2011.

“Industry made the largest contribution to growth, boosted by construction of the $16 billion ExxonMobil-led LNG project and high levels of government spending. Spillover from this activity also drove growth in the services sector, including wholesale and retail trade and transport,” wrote the ADB.

However, the bank also noted that increasing prices, driven by high government expenditure, large resource project investments and rising international commodity prices, saw the consumer price index growth reach double digits in mid-2011.

Indeed, keeping inflation stable will remain key to maintaining economic stability as major mines close in the coming years and the PNG LNG project comes online in 2014.

However, the Central Bank has been praised for monetary tightening in 2011, which helped see inflation fall to an annual headline rate of about 7% at the end of 2011, from close to 10% in the second quarter.

According to the IMF, the economy’s future also depends on the government’s commitment to ensuring that revenues from the LNG plant and minerals such as gold benefit the population.

Landowner companies: a money-siphoning scam

BY ANDREW LATTAS

MY EXPERIENCE OF LANDOWNER COMPANIES in Papua New Guinea (in the Kaliai area and in Pomio where different forestry concessions operate) is that the local landowner company is often made up of different kinds of villagers keen on development.

Some are educated individuals who find the life of gardening hard and arduous; others can be remote villagers who are desperate for some roads; while others are drawn in by the high cost of school fees and low cash crop prices.

Many villagers who initially support logging can change sides once the project starts, when they see the poor quality of the roads and bridges and the low royalty payments.

Generally the initiators of the project are locals who end up being financed by an overseas contractor (often the logging conglomerate Rimbunan Hijau). They will hunt for an interested contractor who is able to fund their legal, travel, accommodation and entertainment expenses whilst in town. The local member of parliament can also put a fair bit pressure on the directors to go with a contractor with which he has existing ties.

My experience has been that the landowner company generally receives a "premium" and even “advance” payments from the overseas logging company to cover its startup costs and its ongoing running “expenses.”

The initiators of the project generally choose the directors and it is often on the basis of their ability to be complicit and silent with regard to the allocation of Premium money within the company.

There are generally no minutes or records of how the money is used and this in turn serves to create an internal culture of solidarity, collaboration and collusion between directors. Some of the money is used to keep junior directors bound in relations of debt to the general manager and other key directors of the company who control the purse strings.

Many directors in the landowner company can be illiterate or only able to read basic Pisin. They will be unable to read legal documents in English and, consequently, will depend heavily on educated directors for information. This will privilege certain individuals and groups within the landowner company, generally, those who have contacts with politicians and the government bureaucracy.

The premium money that the landowner company receives from the overseas logging company is nominally to cover its expenses, but it also operates as gift that co-opts the directors and obligates them to the overseas contractor at the expense of their local ties to villagers.

The landowner company is expected to manage public relations for the Malaysians. It is that the landowner company that should be seen publicly as calling in the riot squad to come and remove road blocks and to arrest those responsible. It is also expected to distribute covertly the necessary gifts to placate opposition and prevent organised protests.

Govt ignores Huawei security concerns

BY ALEXANDER RHEENEY
PNG PERSPECTIVE

CONFIDENTIAL EMAIL CORRESPONDENCE obtained by PNG Perspective.com shows that the Papua New Guinean ambassador to India, Tarcy Eri [right], wrote to then foreign minister Sam Abal on 12 October 2010 to warn that the PNG government should reconsider the engagement of China’s Huawei Technologies on the grounds of national security.

“While I applaud the vision of the Department [of Communication] to network all government entities for purposes of dissemination of information in an integrated way, I believe the national security applications of this project have not been thoroughly examined and thought out,” Mr Eri wrote.

“The recommendation for Huawei Technologies as the sole contractor without a third party involvement is a grave and detrimental oversight. The lack of technical expertise in Papua New Guinea, especially within the government of Papua New Guinea, makes us vulnerable and our national security and sovereignty compromised and undermined,” he wrote.

According to the New Delhi-based diplomat, Huawei Technologies had come under the radar of the Indian government.

“Having said that, I wish to bring to your attention that since January 2010, the intelligence agencies and the Ministry of Home Affairs of the government of India have put Huawei Technologies of China on their radar screens for telecommunications equipment security,” Mr Eri continued.

“The issues of telecommunication equipment security were taken over from the Department of Telecommunications by the Department of Home Affairs with the aim to secure networks and enhance national security.”

Huawei Technologies was also being investigated by a number of foreign governments including Australia, he added.

“Indeed, Huawei Technologies of China is one of the global manufacturers of telecommunications equipment together with Ericsson, Nokia-Siemens and ZTE.

“However, I am also informed that the national security agencies of the United States, United Kingdom, Australia, Indonesia and others have raised concerns about the propriety and integrity of Huawei Technologies in supplying telecommunications equipment.”

The email was copied to the then PNG Department of Foreign Affairs and Trade secretary Michael Maue and the chief secretary to government, Manasupe Zurenuoc.

The O’Neill government, since coming into office in August last year, has embraced the project despite Mr Eri’s concerns. A telecommunications advisor to the O’Neill government told PNG Perspective.com recently that it is now “work in progress”.

Succeed in (PNG) business without really trying

BY PHIL FITZPATRICK

I MENTIONED THE FEELING of “otherness” in a previous article.  The experience or feeling of otherness is a downspin from its parents, culture shock.

Culture shock occurs when one is placed in a situation outside one’s comfort zone; in this case another culture.  The affects can be minimal in some people and extreme in others.

In one recent case a new manager for a Papua New Guinea company came in from overseas.  He spent several days in Port Moresby and then seemed to disappear.  The company found the vehicle with which he had been provided parked outside his hotel but no sign of him. 

Further tracking ascertained that he had flown out of the country a day or so earlier.  Nothing was heard from him again.  In all likelihood the shock of being in a new culture had driven him away.

That is an extreme case.  Most people slowly get over it and come to enjoy their new experiences.  Very few lose that sense of being different from the majority of people around them in their host country however.

The phenomenon seems to be one that affects people from western cultures moving into developing countries more so than the other way round; although I do recall my parent’s anxiety when moving from England to Australia when I was a child.  It didn’t affect me at all; kids seem to be immune to the malady. 

You would expect that Papua New Guineans coming to Australia to study or for other reasons would suffer from it but that doesn’t seem to be the case; perhaps their culturally innate state of being laid back offsets it.  It would be interesting to know if this is really true.

Being laid back is a useful antidote to culture shock and its ramifications should not be ignored.  It probably explains, for instance, why Australia was a comparatively successful colonist in Papua New Guinea.

If the British and Germans had stayed on Papua New Guinea would probably now be a highly stratified society with very rigid behavioural mores, good in some ways but bad in others.  If the French had been the colonisers they would probably still be there and everyone would, surprisingly, be relatively happy.

If the Americans had been the colonising power there would probably be much more development and infrastructure but local people would be a lot more marginalised and the culture would have died out long ago.

The American scenario is interesting and you only have to look at the way they manage their wars to appreciate it.  In Vietnam, for instance, the Australians, with their experience of insurgents in Malaya, took a stance of winning over hearts and minds.

In Phuoc Tuy Province they gained control by providing medical, educational, and other services and building up infrastructure to win over the people and defeat the Vietcong.  In their areas the American approach was to bomb the hell out of the place to gain control. 

Interoil: is it a giant con or a deadset bargain?

BY MICHAEL WEST
SYDNEY MORNING HERALD

THE ROPE IS STRETCHED MORE TAUTLY than ever in the tug-o-war between the true believers and the sceptics in tearaway oil stock Interoil.

For some, especially the short-sellers on its share register, Interoil appears a gigantic con. Look no further than its connections with colourful Vancouver stock promoter Carlo Civelli, they say, and its perennial penchant for over-promising and under-delivering.

For others, Interoil is deadset cheap. It claims to have discovered an "elephant", as they say in the industry parlance; a gas field in Papua New Guinea called Antelope 1 with a flow rate of 382 million cubic feet of gas and 5000 barrels of condensate a day - a world record no less. And that's just Antelope 1. Antelope 2, they claim, is even bigger.

Internet chat forums lit up again a few weeks ago when George Soros lodged a notice showing he had been selling down. Soros is savvy. What could that mean?

Only Interoil knows. The real key to oil and gas plays, particularly in remote climes like PNG, is complex technical data. Yes, Interoil has drilled a couple of wells in the jungle and lit up a massive gas flare or two, but how long would it burn for? How much gas was really there and was it technically feasible to extract it?

Critical information about the likes of on-gas flow rates is known only to a few – but it means the difference between a multi-billion dollar project and an expensive hole in the jungle.

Such are the costs and the technical challenges of developing a major gas project that the PNG government has insisted Interoil – which has a market cap of $2.7 billion – team up with a multinational player to develop its project. To that end, Interoil boss Phil Mulacek has brought aboard UBS, Morgan Stanley and Macquarie as advisors to find this partner and the capital.

Besides the purportedly humungous gas field Interoil also promises to build an LNG plant to process the gas at a cost of $6 billion to $8 billion. It is one hell of a project to pull off.

The problem is … which project?

It has been a week of comedy and confusion in PNG. Government officials have chided Interoil for trying to develop another project – a project not even “envisaged” by the contractual agreement which Interoil had signed with the PNG government in 2009.

Displaying a monumentally thick skin, Interoil announced on Tuesday that its Gulf LNG Project was “on schedule”. This was despite it failing to meet the deadline for Final Investment Decision (FID) approval for at least the third time.

The next day, however, the chairman of the government oil company Petromin, Brown Bai, publicly reminded Interoil that it had no contract to deliver the Gulf LNG project. The project for which Interoil had been approved happened to be situated in another part of the country.

“They cannot change the goal post and disregard their contractual obligations.

“I urge IOC and LNGL (Liquid Nuigini Gas Limited) to respect Papua New Guinea's laws, systems and processes, including accepting that the NEC has rejected the Gulf LNG project as proposed by them,” said Mr Bai.

PNG investors big people for north Queensland

BY NICK DALTON
THE CAIRNS POST

PAPUA NEW GUINEANS are the largest foreign investors in the Far North, according to the latest figures from the Queensland Registrar of Titles.

They bought commercial, residential and other property worth $4.5 million out of $16 million of foreign purchases in the last financial year.

But CBRE Cairns managing director Danny Betros said there had not been many large sales to PNG investors in recent times.

He said the last large sale was the $19 million three-storey office building at 120 Bunda St to a PNG consortium in July 2010.

The building was bought by Mineral Resources Lihir Capital Ltd, a company that receives royalties from the $1 billion gold project on Lihir Island, and invests in property and other concerns on behalf of the community.

In May last year, a PNG family’s first foray into the Far North’s commercial property market was expected to be the start of further investments.

The Honale family bought the home of a Channel 7 local news identity for $3.2 million.

Mr Betros said there were about 12 groups representing PNG investors active in the Far North. He said the mining boom was sparking interest by PNG investors in the Far North as well as because of its close proximity.

It is understood a PNG consortium is also eyeing off one of the Cairns CBD’s largest office blocks, the Corporate Tower.

Crime, protest & burgers in Papua New Guinea

BY MARTYN NAMORONG
THE NAMORONG REPORT

IF IT’S A PROTEST ABOUT DISENFRANCHISEMENT then the solution isn't the law but economics

I recently spent some time at the Ricochet Cafe at Koki Market here in Port Moresby. I had what is undeniably the best burger in the South Pacific - as attested to by one of my Aussie buddies.

The cafe is run by youth from Kaugere squatter settlement. Kaugere is actually safer than other slums in Port Moresby. The boys attending Don Bosco Technical High School would rather walk through Kaugere than via Sabama on their way to Manu.

Now the cafe is run by the youth, who are supervised by Lydia Kailap, an Australian woman who has married a Kaugere lad and totally immersed herself into the life and troubles of PNG.

I bought one of the Ricochet Specials, a burger with all the good stuff packed in. The nice meat pattie, fresh lettuce and tomato, bacon, eggs, sauce, cheese and superb customer service all delivered Ricochet Cafe style.

As I sat to attack the burger with my teeth, Lydia and I talked about the issues affecting young people.

I had just returned from the northern resort town of Madang that was becoming rather notorious for its so called crime problem. The youth in Madang are known to stone vehicles randomly, usually after intoxicating themselves with kava - a drug derived from the roots of a pepper vine.

I put forward the idea to Lydia that much of the trouble with youth in PNG was related to the disenfranchisement they feel as the pace of resource exploitation gains momentum. They see oil being extracted, copper and gold being mined, timber being exported, and they wonder why they live in squalid squatter settlements.

Young people in Papua New Guinea are losing patience with their corrupt, incompetent leaders. Stoning vehicles in Madang epitomises this protest movement. The Lae riots and the anti-Chinese looting also indicated the growing frustrations amongst PNG’s restless youth.

Those who do not want a fair distribution of national wealth call these protests ‘crime’ as they'd rather have a "police solution" than an "economic solution". By calling these young Papua New Guineans raskols or criminals, the elite deny the youth of their claim to social justice and so they are seen as a liability to society that needs to been shut away in a dark prison somewhere.

The only leader who has thought around this issues and tried to address it has been Dame Carol Kidu, PNG’s first female leader of the opposition and the only female member of parliament. Dame Carol's greatest contribution towards the empowerment of the youth has been the legal recognition of PNG’s informal economy.

Sadly, her efforts have been undermined by out of touch male politicians with super size testosterone egos and nothing else to show.

An ignorant elite has also undermined her efforts to create a more equitable society. These two parties that have undermined Dame Carol have an interest in skewing the distribution of national wealth in their favour and undermining real democracy in Papua New Guinea.

That is why they call the protests occurring throughout PNG raskol pasin [crime] in order to keep the people of PNG blind to the fact that the greatest threat to the stability of this nation is posed by the greedy elite who run this country.

They are responsible for its failures and social problems, not the raskols. The so called raskols simply want social justice and their means of protest includes inter alia throwing rocks at vehicles passing by.

Bougainville outlaws must be brought to justice

BY AXEL G STURM

IN 2004 I STARTED to invest in Bougainville Copper because an old friend of mine told me about this investment opportunity.

A couple of years later we founded the European Shareholders of Bougainville Copper (ESBC), a group of independent investors who intend to be some kind of catalysts in the complicated situation on the ground.

Since the beginning I’ve been the ESBC’s president. To be honest: I did not expect the huge challenge that became over the years. In so far it was some kind of “unexpected”!

I created our website www.bougainville-copper.eu, which has grown to nearly 700 pages. This is said to be the best in-depth source on Bougainville, a way to promote the island and a platform to create better understanding amongst people.

Sometimes it is also a warning to dubious people who feel attracted by the island’s rich resources.

Although we want to earn money with our investment on the international stockmarkets in Sydney and Frankfurt, most of us are highly motivated to support Bougainville’s resurrection from the ashes after the crises. That sounds easier than it is in reality. The wounds seem to be healed today, but unfortunately there are still competing groups who are terrorising people.

Bougainvilleans who I met in Port Moresby told me that there were 1,200 left dead due to violence. Other figures as yours of 20,000 result from people who died from insufficient medical care because of the blockade and normal death. It is not easy for me to analyse what is the truth. That does not matter because even a single death related to our mine operations is one victim too much.

My today’s concern is the security on the island that is still threatened by some criminal gangs who pretend to be “honourable” former combatants. Believe me: I spent plenty of hours to find out what they are fighting for. The answer was always the same: personal greed.

I found documents such as reports on voluntary killings committed by former combatants … killings that were absolutely not linked to our company at all.

There were also rumours that representatives of the US American Pritzker Group were in Bougainville in the late 1980s and that they influenced and paid Francis Ona to create unrest on the island.

The Pritzker Group at that time was strongly interested in taking over BCL. If all this should be true, it was not BCL that caused the Bougainville crisis. Unfortunately we cannot prove this suspicion. Perhaps somebody knows more.

Today we see re-appear dubious businessmen in Bougainville who interfere – together with criminals. This is some kind of déjà-vu.

My personal view is that Bougainville will not be a peaceful place until peace is imposed by a strong and respected police squad. Quite obviously former rebels turned to become some kind of Mafia today. All these outlaws have to be brought to justice. If not it might happen that there will be growing criminal groups one day who act like in Central Africa…with all consequences!

Bougainville Copper is ready to resume mining on Bougainville under fair conditions. I can assure to you that the ESBC will keep an eye on this. We want Bougainville to become a pearl of the Pacific region.

We would appreciate if you will support our struggle for a better Bougainville.

Resource developments cut off the community

BY PHIL FITZPATRICK

UP THERE IN THE SOUTHERN HIGHLANDS, Exxon Mobil maintains high, double chain link, razor wire-topped fences around its liquefied natural gas facilities.

The space between is patrolled by guards with dogs. No one is allowed in through the gates without a full body search.

When Australia’s shadow foreign minister Julie Bishop said she had been to the highlands and seen the locals and the project this is what she was talking about. 

I don't know whether she actually stuck a toe outside the gates.

The people inside the fences, particularly the Americans, are paranoid about being attacked and murdered.

A couple of weeks ago the police were routed at the quarry landslide site and their vehicles trashed by a bunch of Huli women.

Exxon Mobil closes facilities down and evacuates expatriates by air at the slightest hint of unrest.  An unrelated clan fracas up the road will do the trick.

The project runs very much like the notorious Freeport mine in West Papua. Flying PNG Defence Force troops in will complete the picture.

And there are similar setups operating at other mine sites like Porgera and Ramu.

I predict that the next incident at the LNG project site will be soldiers fighting with the policemen who already there.

‘Weakened political settings’ afflict PNG

BY SARA STEFANINI
INTERFAX

IN TWO SEPARATE NEWS STORIES last week, two very different images emerged of Papua New Guinea and its lure for oil and gas majors.

The first reminded us that the Pacific country is still plagued by political weakness and instability as well as local hostility. The second highlighted PNG’s new image as a burgeoning global gas hub, ripe for LNG exports.

“Despite the abundant resource wealth and increasing foreign investment, PNG continues to face high levels of poverty, which have fuelled local grievances towards projects in the extractive industries,” global risk researcher Maplecroft said in a profile published in mid-March.

“Social resentment over the lack of investment by the government at a local level risks business, particularly extractive projects, becoming a target for violence and criminality,” it added.

Similarly, Standard & Poor’s lowered PNG’s long-term sovereign credit rating from stable to negative in January, because of “weakened political settings” following a short-lived battle between two would-be prime ministers in December.

Buoying those descriptions, the PNG government sent troops into the Southern Highlands on Thursday to quiet landowner protests near the site of ExxonMobil’s $15.7 billion LNG project. Work at the site has been suspended for weeks as landowners are demanding additional compensation.

Even more telling, perhaps, is what did not happen this week. InterOil has not announced a final investment decision for its Gulf LNG project, the country’s second proposed export facility.

The Texas company had aimed to announce it last December, but the constitutional crisis scuppered those plans. It then pushed the target date to 31 March.

While InterOil did not return Interfax’s call on Thursday, an investment bank analyst who covers the company said the government is to blame for the delay.

“The hold up right now is they have not yet received final government approval,” said Pavel Molchanov of Raymond James. “If the timing of the project was purely in InterOil’s control, I’m sure they would have reached a final investment decision by now.”

But the delays, protests and troops do not appear to be deterring the big players. The same day the troops charged into the Exxon site, China National Offshore Oil Corp. stepped into PNG with the acquisition of a 70% stake in three petroleum prospecting licences.

This came just weeks after Exxon and its LNG partner, Oil Search, expanded their already sizeable PNG assets, buying a prospecting licence for $15 million. Just a few weeks before that, Mitsubishi agreed to pay $280 million for stakes in nine of Talisman’s prospecting and retention licences, which could be developed into a third LNG project.

After all, for the majors, PNG is no riskier than many other resource-rich hubs, argued Molchanov. “Oil and gas companies have been going into dangerous countries for a long time; it’s certainly not like Iraq.”

O’Neill orders troops into Hela to protect miners

BY EOIN BLACKWELL
AAP

PRIME MINISTER PETER O'NEILL has formally announced a troop call-out to the resource rich Hela region of Papua New Guinea amid ongoing disruptions to mining activity.

Troops will be sent to both Enga and Southern Highlands provinces tomorrow to bolster a police presence amid ongoing law and order issues.

On Thursday, hundreds of illegal miners reportedly converged on the Porgera gold mine threatening and injuring staff and destroying equipment.

Road blocks in Tari have disrupted parts of the massive Exxon-Mobil lead PNG Liquefied Natural Gas project.

The road blocks were set up in the weeks after up to 29 settlers were killed in a landslide at the Tumbi quarry.

"As a responsible government, we cannot sit back and allow hooligans in our community to threaten and disrupt normalcy, and place vital economic projects at risk," Mr O'Neill said.

"We must bring these situations under control quickly and reassure our citizen and investment partners of our ability and commitment to addressing law and order issues decisively."

He said Defence Force head, Brigadier General Francis Agwi and senior defence staff left Port Moresby for the Southern Highlands capital of Mendi on Thursday to make a formal assessment of the situation.

The raiders reportedly captured three staffers, seriously injuring one, and later freed them.

Exxon to restart LNG work after dispute resolved

REUTERS

US OIL GIANT EXXON MOBIL intends to resume work at its $15.7 billion liquefied natural gas project in Papua New Guinea after a dispute with residents over land was resolved, the company said yesterday.

"Community leaders in the Hides area have come to a resolution with the government to allow work in Hides to resume. We have begun to mobilise our workforce to recommence work," Exxon spokeswoman Rebecca Arnold said.

Esso Highlands, the Exxon subsidiary which operates the LNG development, had stopped work in the Hides region of the Southern Highlands after residents demanding additional compensation for their land threatened workers at the plant.

The Papua New Guinea government had earlier said it was preparing to deploy troops to quell the protests.

Illegal logging: is it really here to stay?

THE ECONOMIST

ILLEGAL LOGGING IS BIG BUSINESS. According to a study by Seneca Creek Associates, each year 130m cubic metres of roundwood—worth $12 billion—comes from sources which aren't kosher. This amounts to roughly 8% total global production.

Elsewhere the proportion is even higher. Almost a third of hardwood lumber and plywood traded in the global markets may be of suspicious provenance.

Greenpeace has mounted an aggressive campaign against illegal logging in Papua New Guinea since 2004 when the conservation group published a report indicating that 90% of logging there is illegal.

Indonesia, another perennial offender, seems to have improved since being fingered in the same report: illegal logging has gone down from up to 80% in 2004 to around 50% in 2009, according to Chatham House. Nevertheless, this still means that every two seconds an area the size of a football field is lost to illegal logging.

An upcoming study by the World Bank is considering how to combat such flagrant breaches of the law. They identify the ineffectiveness of the criminal justice system as a weak link. Bribery and corruption is rife.

Few illegal loggers face prosecution; fewer still are convicted. In 2003 not a single one of a reported 971 cases of illegal logging in Indonesia was prosecuted. Things have improved only slightly since then. In 2008 two dozen of 404 cases resulted in prosecution, though just 14 ended with convictions.

A report from the Centre for International Policy, an American think-tank, recounts how documents under review by prosecutors in Honduras disappeared overnight after a delay imposed by the assistant attorney general.

Besides the usual call for more sophisticated law-enforcement techniques (which may curb many other forest crimes such as poaching), the World Bank argues for targeting criminals higher in the chain of criminal actions. This, it argues, could yield better results than going after low-level local miscreants.

PNG and Cairns businesswomen on the same page

BY CAIT BESTER
THE CAIRNS POST

FOUR PROMINENT CAIRNS BUSINESSWOMEN will be guest speakers at a Women in Business Summit in Papua New Guinea next week.

As a new generation of PNG women continue to step into the business world, the Cairns contingent will be on hand at the three-day summit to offer guidance, share their personal success stories, answer questions and help kick-start business ideas.

In 2010, the National Development Bank launched an initiative across PNG to encourage and assist woman into their own business and to-date the program has been successful with more than K8.9 million poured into it.

Cairns Businesswomen's Club president Kylie Gabutto, who is going to PNG, said there were many inspiring businesswomen in that country and she hoped the forum would break down the barriers that often held women back.

Ms Gabutto said the bank recognised the need to help women overcome their concerns.

"There has been a series of workshops held across PNG in the last six months and every workshop was well attended," she said.

"These are amazing, inspirational women who have gone into business and are now bringing cash back into what have been self-efficient communities. This is breaking down a non tradition for them."

Ms Gabutto said the summit was an opportunity to create a businesswomen's hub and would be used as a networking sister club.

She said it was also an opportunity to build a stronger relationship with the PNG business community.

"We are their neighbours and we as a business community need to recognise that and build a bridge to close that gap between PNG and Cairns," she said. "It can only mean fantastic opportunities.

The summit will be held from 25-27 March.

PNG ranked worst for mining political risk

RENO (MINEWEB)

IN ITS ANNUAL RANKING of countries in terms of political risks for mining investment, US business consultants Behre Dolbear has ranked Papua New Guinea as the worst in terms of political risk for mining projects.

Australia, Canada, Chile, Brazil and Mexico were the top five nations in which to locate projects.

The 25 nations considered in this year's survey were ranked on seven criteria: economic system, political system, degree of social issues affecting mining, delays in receiving permits, degree of corruption, stability of the country's currency, and the competitiveness of the nation's tax policy.

To download the free survey report, "2012 Ranking of Countries for Mining Investment Where ‘Not to Invest'", go to http://www.dolbear.com

Getting the right mix: Digging up Papua New Guinea

BY PHIL FITZPATRICK

IT SEEMS AXIOMATIC that whenever mining and petroleum companies set up shop in Papua New Guinea, conflict with the local landholders follows.

These conflicts set the tone for the future and generally dog a project for the rest of its commercial life. In most cases it doesn’t have to be like that. 

There are countless examples of bad practice, the most significant being the Panguna mine on Bougainville, but no one seems to learn from these mistakes. 

There are a number of reasons for this and while it is never constructive to play the blame game it should be noted that it is occasionally not all the direct fault of the companies.

For some reason, which I am yet to fully fathom, mining and petroleum companies approach traditional landholders as if they are the enemy.  This just doesn’t happen in Papua New Guinea, it is widespread in Australia too.

There is generally no recognition that traditional landholders are legitimate stakeholders in any resource development.  Perhaps it is an historical thing: the companies see the protests that have accompanied previous developments and assume it will inevitably happen to them. 

Maybe that is the lesson that they learned from Bougainville – landholders are an enemy hell bent on stopping a project and must be treated as such.

In Papua New Guinea, as elsewhere, traditional landholders regard both the surface of their land as well as what is above and below it as their property. 

You can tell them that the rights to minerals are vested in the state until the cows come home but the message will never get through – the land and the resources belong to them, full stop!  If there is to be any development of those resources they expect to receive benefits too.

Whether it stems from this or not, most companies display a profound disinterest in the landholder’s point of view.  They don’t want to know what makes them tick; they just want to know who they’ve got to pay to make the project a goer.

Landholders, understandably, take this attitude as an affront.  They want to know what the company is thinking and they cannot understand why the company doesn’t want to know what they think.

When the concerns of the landholders are voiced and continually ignored they tend to coalesce and focus in a few key community individuals who take up the task of spearheading the campaign to be heard. 

This suits the companies admirably because it personifies their problems.  The landholder spokespersons then become the face of the company problems and are demonised. 

This is very stressful for the individuals concerned and they can become overly subjective, even irrational and messianic.  Stopping the company becomes a cause celebre and logic tends to fall by the wayside.

In Papua New Guinea there is a culture of greed and corruption among politicians and administrators.  This has led to an open slather approach to resource development. 

Not only are landholders faced with a hostile company that has no interest in them except as impediments to their plans, they also have to deal with a similarly inclined government.

You can’t really blame the company for being like a kid in a lolly shop.  When they are presented with the opportunity to ignore proper safeguards and save money they grab it with both hands. 

BCL uncertainty is poison, says European lobbyist

BY BLAIR PRICE
PNG INDUSTRY NEWS

EUROPEAN SHAREHOLDERS OF BOUGAINVILLE COPPER president Axel Sturm says Papua New Guinea must change into a “land of the expected” and unsurprisingly, he believes significant government investment into reopening the Panguna mine will pay off.

While there has been uncertainty over whether the Panguna mine will ever reopen since it closed down in 1989 before the subsequent civil war, ESBC is concerned that Bougainville Copper shares are becoming prey to short sellers due to the recent political instability in PNG.

“It has a new prime minister elected by an overwhelming majority in Parliament while an old stubborn prime minister cannot accept having been ousted,” Sturm said.

“Unfortunately, the new prime minister’s deputy contributes to this situation by making irritating statements from time to time. This fires foreign investors’ confusion.”

PNG’s parliament has passed the long-heralded sovereign wealth fund designed to safely manage windfall government revenues from the PNG LNG project – especially through offshore investments to avoid causing even more local inflation.

But Sturm said that SWF investment into PNG industries would be a great signal to investors worldwide.

In what would also lift his own share portfolio, Sturm would like to see the PNG government increase its stake in Bougainville Copper (about 19%) and even buy more shares to give the Autonomous Bougainville government its first stake.

“I imagine if PNG/ABG hold up to 25% or even more in Bougainville Copper, both would be keen to increase their stake’s value by fast-tracking the reopening [of] the Panguna mine,” Sturm said.

“A strong investment in Bougainville Copper shares by PNG would be understood by investors as PNG’s commitment to a better economic future. Investors are watching out for security of their investment – uncertainty is poison. Certainty is strongly needed now.”

The Frankfurt Stock Exchange has become the leading stock market for trading Bougainville Copper shares which are also Australian Securities Exchange-listed.

Making money and missing out in PNG

BY ANTONY LOEWENSTEIN
NEW MATILDA

AT PORT MORESBY INTERNATIONAL AIRPORT sit piles of free brochures labelled Map and Handy Mining/Petroleum Guide. Inside are emergency phone numbers alongside a foldout map that lists countless projects in more than a dozen places across the impoverished nation.

The $15 billion, Exxon-Mobil LNG project dominates the page, with a red line representing proposed pipelines from the Southern Highlands straight to the capital.

The glossy pamphlet is one of the first thing visitors see as they arrive in the resource-rich state and it speaks volumes about how prime minister Peter O’Neill and his government view the future prospects of the country.

Minister for Petroleum and Energy William Duma, in comments given at the February opening of Shell offices in Port Moresby, proudly told the assembled crowd that, "in a small way and through consistent political leadership at the national level, PNG has been able to attract international interest for the exploration and development of our under-developed hydrocarbon resources."

It’s early days in the O’Neill era but there are few tangible differences between the previous Michael Somare regime and the new leaders in relation to welcoming multinationals to develop and exploit PNG’s resources.

James Arvanitakis, cultural researcher at the University of Western Sydney who has spent time working in PNG and the Pacific, tells New Matilda that "PNG has a long history of relying on extractive industries and a change of government won’t alter that. Unless there’s a shift in development philosophy, power relationships with these industries will continue to fund political campaigns."

There’s no doubt, however, that Somare is widely viewed with suspicion for failing to wisely invest the billions received from foreign companies.

Somare’s legacy is disastrous, with his years in power contributing to a deeply corrupt state and under-resourced services. Nobody interviewed by New Matilda wanted the "father of the nation" to return.

The main advocates for Somare over the last years have been Australia and China, two nations competing for PNG’s affections. AusAID recently announced the slashing of more than $90 million by cutting the numbers of advisers it employs for PNG programs but it remains arguably Port Moresby’s financial saviour.

Australia’s High Commissioner to Port Moresby, Ian Kemish, recently told the National Times that Canberra fully backed exploitation of natural gas, arguing that it would assist the people themselves. The evidence for this is virtually non-existent.

Washington is watching. US Secretary of State Hillary Clinton admonished both Beijing and Somare during a visit to Port Moresby in November 2010, warning of a "resource curse".

In later statements to the US congressional foreign relations committee, Clinton was more direct. "Let’s put aside the moral, humanitarian, do-good side of what we believe in and let’s just talk straight, real politics," she said. "We are in a competition with China. Take Papua New Guinea — huge energy find."

Clinton accused Beijing of attempting to "come in under us" and stated that it would be a "mistaken notion" to think that America would retreat from "the maintenance of our leadership in a world where we are competing with China."

PNG aims to replace Asian entrepreneurs

BY ROWAN CALLICK
THE AUSTRALIAN

THE PAPUA NEW GUINEA GOVERNMENT has launched a campaign to help its citizens replace the Asian migrants who have in recent years taken over most of the country's small businesses.

Richard Maru, managing director of the National Development Bank which is leading the campaign, said that 90% of the country's retail sector -- stores and kaibars that sell basic fast-foods -- is now in the hands of Asian entrepreneurs.

"These foreign nationals are now going into districts, including remote districts, to run and operate shops while our people remain spectators," he said.

Papua New Guineans, he said, had suffered from "a lack of empowerment and encouragement from successive governments".

Following a small business summit in Kokopo near Rabaul last year, attended by 800 people, the national government has now committed $56 million to the campaign.

This will include the resurrection of the Stretpasin Stoa (fair-deal store) scheme that succeeded, in the early years following PNG's independence, in fostering a rapid rise in Papua New Guineans gaining experience in the private sector by running retail businesses.

Recent years have, however, seen a delocalisation process, with people from Asia -- especially from mainland China -- using their connections in the distribution chain reaching back home, to source products more cheaply than Papua New Guineans.

Mr Maru, who has a British MBA, said that through the Stretpasin Stoa scheme, "we will reclaim our birthright".

"We should be encouraging government to de-license (foreigners), and we are even looking for laws to restrict these businesses to only Papua New Guineans," he said.

Tumbi disaster: Exxon rushed to meet deadlines

BY REBEKAH KEBEDE
REUTERS / CHICAGO TRIBUNE

A DEADLY LANDSLIDE in the mountains of Papua New Guinea, near where US oil major Exxon Mobil is building a $15.7 billion gas project, is raising fresh questions about the global energy industry's scramble for ever harder-to-reach resources.

The landslide tore through a quarry used by Exxon in January, killing at least 25 people in the poor South Pacific country, but it has stirred little international publicity, even though an expert report had questioned the safety of the excavations.

The controversy also raises some familiar issues aired by critics of "big oil" in previous disasters: a pressure to deliver results, contractors found to have cut corners and remote operations that limit government oversight.

Exxon, which was using the quarry to produce rock and gravel needed to develop the upstream end of its gas-export project, has said it is unclear what caused the disaster in Papua New Guinea's steep, heavily wooded Southern Highlands.

The Papua New Guinea government has denied the quarry contributed to the landslide, but local villagers, environmental activists and an international landslide expert are unconvinced and want a thorough, independent investigation -- something that shows no sign of happening despite evidence that quarrying work was being rushed to meet tight construction deadlines.

Less than 12 months before the landslide, an independent consultant, Italian firm D'Appolonia, found Exxon's quarrying operations did not meet the environmental and social standards demanded by the company's creditors and it concluded that workers had been under pressure to meet deadlines.

"The overall impression of (the consultant) is that incidents and situations have developed because the project has circumvented correct procedures in the interest of schedule...," D'Appolonia said in a report dated March last year and commissioned by the project's main creditors.

"The project will need to make sure that schedule does not dominate decisions," it added.

The report, compiled by a firm that also counts Italian energy group Eni and the European Commission among its clients, was sitting in a corner of Exxon's website when, just before dawn on January 24, a mountainside collapsed above one of several quarries Exxon was running in and around the site.

A villager recalled hearing a loud crack ring out across the valley as the slope gave way, collapsing through the Tumbi quarry and burying homes that had been perched beneath it. The disaster left a trail of debris stretching more than 500 meters (500 yards) and also carved through a road into the project.

Mining at Ok Tedi likely to be extended

BY JEMIMA GARRETT
RADIO AUSTRALIA

THE LIFE OF Papua New Guinea's giant Ok Tedi gold and copper mine looks set to be extended again.

Ok Tedi Limited is working on a detailed mine extension plan, that must be put to government for approval, before mining can extend beyond 2013.

The initial plan was to mining to cease in 2022 but managing director Nigel Parker says with gold and copper prices high that date has now been pushed out to 2025.

More exploration on the pit floor is planned.

Mr Parker says the company is on track for approval of the mine extension plan in September.

Expert report warned Exxon about Tumbi quarry

A REUTERS NEWS INVESTIGATION into the deadly Tumbi landslide in the Southern Highlands has revealed that an expert report had questioned the safety of excavations conducted by Exxon Mobil, which is building a $15.7 billion gas project in the region.

The January landslide tore through the quarry and killed at least 25 people.

Reuters says that less than 12 months before the landslide, an independent consultant, Italian firm D'Appolonia, found Exxon's quarrying operations did not meet the environmental and social standards demanded by the company's creditors and it concluded that workers had been under pressure to meet deadlines.

"The overall impression of (the consultant) is that incidents and situations have developed because the project has circumvented correct procedures in the interest of schedule...," D'Appolonia said in a report dated March last year.

"The project will need to make sure that schedule does not dominate decisions," it added.

Exxon closed the Tumbi quarry in August last year, five months before the landslide, because it no longer needed to use it and had taken heed of the D'Appolonia report, making the site secure.

Exxon also said landslides are common in that part of the Southern Highlands.

The Papua New Guinea government, for its part, has denied the quarry contributed to the landslide, but local villagers, environmental activists and an international landslide expert are unconvinced and want a thorough, independent investigation -- something that shows no sign of happening.

Reuters says that “the controversy also raises some familiar issues aired by critics of ‘big oil’ in previous disasters: a pressure to deliver results, contractors found to have cut corners and remote operations that limit government oversight.”

You can read the full article in PNG Attitude tomorrow.

Energy giants move in as exploration increases

BY JOHNNY BLADES
RADIO NEW ZEALAND INTERNATIONAL

THERE’S INCREASED INTEREST in Papua New Guinea by major global energy companies keen to unlock the value of the country’s substantial oil and gas assets.

Last week, Mitsubishi entered into a joint venture to develop leases held by Canada’s Talisman Energy in Western Province for potential gas exports.

Exxon Mobil is already leading the major Liquefied Natural Gas project in PNG while Shell has announced it’s setting up an office in Port Moresby to further its alliance with state energy company Petromin.

Now Oil Search has announced its drilling activities in the Gulf of Papua are attracting interest from major players.

The full extent of PNG’s energy resources is still unknown, but exploration activities underway are throwing open doors of big business opportunity.

Oil Search says recent extra gas discoveries would support a third 3.3 million tonne supply for the PNG LNG project, which it says could double PNG’s gross domestic product.

Development of PNG’s oil fields has been ongoing for almost two decades but according to Gordon Ramsay, an analyst for the global financial services company UBS, the gas sector is beginning to take off in a major way.

“Gas is starting to be commercialised and there’s some world class gas discoveries in Papua New Guinea,” Mr Ramsay said.

Minister of Petroleum and Energy, William Duma, describes the country as virgin territory in terms of oil and gas exploration.

He’s welcomed the re-entry to PNG of Shell, who the government sees as a leader in developing the Elk/Antelope resource which is currently licensed to Interoil - a company that Mr Duma says is too small an entity to be able to do justice to the resource’s potential.

“We need more investment in our resources sector,” he said. “Shell is one of the world’s largest energy companies. We’ve already got Exxon Mobil in the country. So for us, in terms of competition, we’re better off having more major energy companies showing interest and actually investing in PNG.”

Mr Ramsay says while the main discoveries have been onshore, in remote and challenging regions like the Southern Highlands, recent drilling in the Gulf has generated excitement.

“In Papua New Guinea, I think certainly in the Southern Highlands region, the terrain has made it very difficult to explore in the area so there’s not a high level of maturity of exploration, so there’s potential to find more gas,” he said.

“But again, it really comes down to drilling wells and proving that up. And in the Gulf, there’s already been some discoveries but Oil search is confident there are more to be made.”

However there’s growing public discourse in PNG about the benefits from major resource extraction.

PNG’s civil society has repeatedly voiced concern that the growth of the resources sector will only increase systemic problems with corruption among officials.

European shareholders war on BCL short selling

THE EUROPEAN SHAREHOLDERS of Bougainville Copper (ESBC) have asked all shareholders in Bougainville Copper (BCL) to pitch their shares at a high price ($25-30) to prevent custody banks from using them for unauthorised lending to short sellers.

“We want to stop fraudulent manipulation in [Bougainville Copper] shares,” says ESBC President Axel G. Sturm.

“Short selling generated huge losses in Bougainville Copper shares within the last year”, he said.

“As a result the share price plunged under $1 since January 2011. This happened although all news flowing from Bougainville had been very positive during that period.

“The green light for re-opening our Panguna mine is a question of a couple of months only,” he stated optimistically.

According to Mr Sturm, who is based in Andorra, Bougainville Copper shares are supposed to have a fair value of $30-50.

“The exact price – of course – depends on the actual market prices of copper, gold, silver and molybdenum,” he said.

“On the other hand BCL is highly vulnerable to market manipulation: less than 30 percent is in free float (the international mining giant Rio Tinto owns 54% and the state of Papua New Guinea 19%.”

PNG vastly under-explored, says Petroleum Minister

RADIO NEW ZEALAND INTERNATIONAL

WILLIAM DUMAH, PNG’s Minister of Petroleum and Energy, says the full extent of the country’s resources is still largely unknown.

His comment comes amid increasing investment in PNG’s energy sector by major global players.

Mitsubishi has just entered into a joint venture to develop leases held by Canada’s Talisman Energy in Western Province for potential gas exports.

Exxon Mobil is already leading a major liquefied natural gas project in PNG.

And this month, Shell announced it’s setting up an office in Port Moresby to further its alliance with the state energy company, Petromin.

Mr Duma says PNG welcomes more major players.

“Compared to other countries in the region, we are relatively under-explored,” he said, “there’s a lot of areas that still need to be explored.

“There’s a lot of seismic work that needs to be done. We are all now concentrating on onshore acreages. We have not moved even to offshore acreages. So we are virgin territory in terms of exploration.”

Commission must listen to Pacific on seabed mining

PAPUA NEW GUINEA MINE WATCH

THE PACIFIC’S TECHNICAL ADVISORY BODY, the Secretariat of the Pacific Community, is being urged to listen to the views of the region’s communities on seabed mining, reports Radio New Zealand.

The SPC has drafted a legislation on deep sea mining intended as a guide for Pacific countries with ocean floor mineral resources.

The national coordinator of Papua New Guinea’s marine conservation group, Mas Kagin Tapani, has joined others in criticising the European Union-funded framework for its lack of protection of those likely to be affected by extractive work.

PNG is the first Pacific country to have granted a commercial mining licence, with a Bismarck Sea project scheduled to start in 2013.

Mr Tapani says 85% of Papua New Guineans, and especially those in the vicinity of the project, rely on marine life.

“SPC… have to come out, get out of their air-conditioned offices there in Fiji, come to Papua New Guinea, visit the local communities, call for the views of the people themselves, not please the European Union who is funding their operations in Fiji,” he said.

Palm oil is the leading PNG export to Europe

RADIO NEW ZEALAND INTERNATIONAL

A NEW REPORT HAS LABELLED PALM OIL as Papua New Guinea’s leading export commodity to the European markets with record figures of $45 million a year.

The report details figures from 2010 economic data that provides a record of the exports and imports for PNG with countries in Europe.

The report also states in 2010 the country recorded a worldwide trade surplus of $4 billion.

The report outlines the main PNG export commodities starting with palm oil then prepared food, vegetable products including coffee and tea, precious/semi precious stones and mineral products.

European Union ambassador Martin Dihm says the free trade agreement which exists with PNG is the only one in the Pacific that is called the Interim Economic Partnership Agreement and is designed to help with development.

Controversy over LNG expansion plans

THE DOW JONES NEWSWIRE has reported that the $15 billion LNG project in Papua New Guinea operated by ExxonMobil will know by the end of the year if it has enough gas for an expansion that could vastly improve its profitability.

But LNG Watch in PNG is not so sure of the benefits.

PNG LNG is one of the largest and most complex energy projects under construction worldwide. An expansion to three liquefied natural gas production units from the two currently planned is being examined.

Dow Jones says that “an expansion could also benefit the impoverished nation of PNG, whose gross domestic product is already set to more than double if the project's foundation stage is completed in 2014 as planned”.

LNG Watch comments: “Define poverty! Most Papua New Guineans bitterly disagree with western indicators of wealth!

“And who will benefit from this economic growth principally? The company, its shareholders, a small national elite and their political patrons. The people of PNG will only 'own' the pollution, the landslides, the security problems.”

State-owned enterprises face shake-up

RADIO NEW ZEALAND INTERNATIONAL

A SHAKE UP OF STATE-OWNED ENTERPRISES in Papua New Guinea is likely after revelations the agencies are not meeting obligations to pay a dividend.

The SOEs include the water, power and phone utilities, Air Niugini and Petromin.

The new head of the Independent Public Business Corporation, which oversees the SOEs, Thomas Abe, told the Post Courier the agencies are hampered by political interference.

The executive director of the PNG Institute of National Affairs, Paul Barker, says a former prime minister, Sir Mekere Morauta, was largely unsuccessful in his bid to privatise the SOEs ten years ago.

But he says despite the limited time before the June election, he may try to initiate some reforms.

“Clearly Sir Mekere has that drive and he would like to push through some of the reforms that he started over a decade ago, if only to push for some competition, push for some greater vitality in these organisations,” Mr Barker said.

Royal Dutch Shell collaborates with Petromin

BY DAVID WINNING
WALL STREET JOURNAL

AROUND SIX MONTHS AFTER SIGNING a strategic alliance with Papua New Guinea’s state oil company, Petromin, Royal Dutch Shell is setting up a representative office in Port Moresby.

Shell’s strategic alliance with Petromin includes a joint study of major basins in PNG with the potential to contain big oil and gas deposits. The study is due to be completed this year, and could be a springboard for Petromin and Shell to participate in projects together.

“The opening of the office affirms Shell’s interest to invest in PNG and offers opportunities for us to work more closely with our partner, Petromin,” said Ton Ten Have, Shell’s Vice-President Commercial Asia.

According to a BP study, PNG had 15.6 trillion cubic feet of proven reserves of natural gas at the end of 2010. That figure likely underestimates the true resource as PNG has been lightly explored up to now.

“We welcome the increased presence of Shell and believe it will further facilitate our close cooperation for future opportunities in PNG,” said Joshua Kalinoe, Petromin’s managing director.

“Together with Petromin, Shell will help PNG realise the full potential of its energy resources.”

Shell’s move comes as several other companies look to bring in partners on projects in Papua New Guinea.

Under pressure, US increases Pacific tuna offer

ISLANDS BUSINESS

AS THE PACIFIC RACES TO SEAL A DEAL for its tuna stocks, Papua New Guinea has been able to secure a temporary payment of $45 million from the United States for the Pacific Islands parties as a condition for revoking the termination of the US treaty.

The move has been described as significant given the history of the treaty and the lengthy negotiations for a new agreement.

This will give the United States and the Pacific Island nations more time to continue negotiating for a successor treaty.

The interim deal represents a breakthrough as stakeholders have gone through some lengthy and intense talks.

Papua New Guinea’s Peter O’Neill wrote to Pacific Islands leaders last month informing them that his government had been in contact with US officials and he would be expecting the US to pay $45 million for the 9,000 days its fishing fleet will operate in the Pacific region as a condition for revoking its notice to withdraw from the treaty.

PNG’s Minister for Trade and Commerce Charles Abel personally relayed this message during treaty negotiations in Nadi last month.

Under the current treaty, the US gives about $18 million to 16 members of the Pacific Islands Forum Fisheries Agency while its industry pays $3 million plus indexation.

PNG had issued a notice to withdraw from the US treaty last year, which would have brought an end to the treaty in May this year, leaving the US to negotiate with individual nations until a new deal is finalised.

Timber industry says record logging will continue

BY JEMIMA GARRETT
RADIO AUSTRALIA

FOREST CLEARANCE ON DISPUTED LAND-LEASES in Papua New Guinea is likely to continue at record levels for the next five to six years, according to the organisation which represents logging companies.

In 2011, logging on Special Agricultural and Business leases pushed Papua New Guinea's log exports to record highs - so much so that some commentators now place PNG as the second largest exporter of tropical logs in the world.

A public outcry prompted the PNG government to set up a Commission of Inquiry into this kind of logging and announce a moratorium on the approval of new forest clearance authorities.

But that does not seem to have slowed the chainsaws.

In the past 10 years, 11% of PNG’s land mass has been leased out for 99 years under controversial Special Agricultural and Business leases - many of which were concluded without the knowledge or permission of landowners.

In 2011, log exports from these leases reached 650,000 cubic metres.

And Bob Tate, executive officer of the PNG Forest Industries Association, says that despite the moratorium on the issuing of new forest clearance authorities, that harvest is set to continue.

“Obviously, a consequence of the government deciding to expand these SABLs would be an increase in log exports from those projects and it is envisaged that this increase of 600,000 is probably going to be maintained for about another 5-6 years,” he says.

“It may surprise some [people], but again the NGO movement and ourselves are, if you like, singing the same song. We've been long concerned about the potential for abuse and what we believe has turned into, in many instances, real abuse of the system.

“In our experience we have very little to do with [SABLs]… I think there is roughly probably 70 odd SABLs operated, off hand I could think about only 2 or 3 that are operated by existing timber companies in PNG, so it leaves the way open for a lot of new players to come in.”

Despite the record level of log exports, Bob Tate says Papua New Guinea is still within its sustainable yield of timber. He is asking the Commission of Inquiry for a moderate response.

“You shouldn't throw out the baby with the bathwater. PNG needs rural development, it needs food security, foe want of a better description. It is how we manage the change to that stage of development that is critical. We believe at the moment it is not being managed very well,” he says.

Australia must ban illegally logged wood

BY JEREMY HANCE
MONGABAY.COM

AUSTRALIA SHOULD JOIN THE WIDENING EFFORT to stamp out illegal logging, according to testimony given this week by tropical ecologist William Laurance of James Cook University in Queensland.

Presenting before the Australian Senate's rural affairs committee, Laurance argued that the massive environmental and economic costs of illegal logging worldwide should press Australia to tighten regulations against importing illegally logged timber at home.

"Countries like Australia import a lot of timber and wood and paper products, especially from the Asia-Pacific region. Illegal logging is still rife in this region and Australia has a chance here to make some important inroads in the global battle to fight illegal logging and timber theft," Laurance told mongabay.com.

Over half of the timber coming out of ten tropical nations—including Papua New Guinea, Indonesia, Cambodia, and Myanmar—is illegally harvested or stolen according to recent research by Interpol and the World Bank. The same study estimated that illegal logging promoted the loss of some 8.4 million hectares of forest annually, or an area the size of Austria, by pushing new roads into once inaccessible forests.

Laurance noted in his presentation that much of this timber makes its way to China, which Laurance calls a "black hole" for illegally harvested timber. The timber is then manufactured into consumer goods and often shipped abroad to countries such as Australia.

According to the Chatham House, an NGO devoted to independent analysis, China imports 16-24 million cubic meters a year. Although the product may be "Made in China," Laurance told the committee it was likely logged elsewhere and quite possibly illegally.

Illegal timber is contributing to the decline of forests across the tropics, depleting biodiversity, threatening indigenous groups, emitting vast amounts of carbon, and imperiling ecosystem services such as erosion control and watersheds.

Many protected areas have even been infiltrated by illegal loggers. The practice is also often connected to other criminal activities such as wildlife poaching, another major problem in many tropical countries.

But its not just tropical forests that are at stake, says Laurance, since illegal logging comes with a big economic cost to developing nations.

"According to the World Bank, illegal loggers are defrauding developing nations of some $15 billion annually. This happens because a lot of timber is effectively stolen without paying government royalties and export duties. The figure leaps up to $60 billion a year, again according to the World Bank, if the broader social and environmental costs of illegal logging are included."

Given the impacts, a number of industrialized nations have begun to take action against the illegal logging trade. In 2008 the U.S. amended its Lacey Act to prohibit the importation or sale of illegally logged wood. Meanwhile the EU has the Forest Law Enforcement, Governance, and Trade (FLEGT) initiative and even stronger provisions coming into effect soon, and Laurance argues that Australia should follow suit.

"It would help level the playing field for legitimate timber and wood-products producers, both in Australia and internationally," Laurance says. "Right now the illegal loggers are cheating the system." By cheating the system, illegal loggers are often able to outcompete law-abiding manufacturers.

Laurance recommended that a new illegal logging law in Australia should be defined fairly broadly, to include situations where bribery is used to obtain forest concessions and where loggers and shippers fail to pay taxes or export duties, in order to have more impact.

Even as Laurance spoke in Canberra, however, the illegal logging ban in the U.S. has recently come under attack by some politicians and the Tea Party fueled by government raids of the musical instrument Gibson Guitars. The company is suspected of knowingly importing illegally logged wood from Madagascar as well as unmilled wood from India, although critics say it is an example of overregulation.

Laurance warned the committee that timber lobbyists would try to play down the environmental and economic impact of illegal logging. He told mongabay.com that lobbyists such as Alan Oxley with World Growth International, "are being well-paid to defend some of the biggest forest-exploiting corporations operating anywhere."

As an example he said that the president of Papua New Guinea Forest Industries Association, Bob Tate, told the Australian Senate that 1-2% of PNG’s timber exports were illegally logged, an estimate that was in stark contrast to the Interpol and World Bank data.

"That's a laughable figure, and it could only arise if one uses a ridiculously narrow definition of 'illegal'," says Laurance.

"If one includes the whole panoply of illicit activities in PNG right now—from the widespread use of Special Agricultural and Business Leases to circumvent forestry laws, to the nearly $100 million court judgment recently levied against a foreign corporation for massive illegal logging in the Western Highlands, among many other examples—one begins to appreciate just how ridiculous Bob Tate’s figures are."

The last decade has seen a decline in illegal logging worldwide by around 22 percent. Experts believe some of that decline is due to the Lacey Act amendment and anticipation of the EU's new law. However, the current situation still means that it is difficult, if not impossible, for the average consumer to know where a product was harvested and in what manner. Laurance believes new legislation could change that in Australia.

"I am sure that Australian consumers don't like to be duped into buying illegal timber products," he said.

Pacific's imperilled tuna industry moves south

BY EDWIN ESPEJO
ASIA SENTINEL

IN MARCH, THE COMMISSION THAT OVERSEES the harvest of tuna in the vast reaches of the Pacific Ocean is to meet to decide whether to lift a two-year-old ban on fishing in one of the strategic migratory paths of the fish, which are declining in numbers as their value skyrockets.

The Pacific supports a tuna fishery worth US$1.8 billion annually that accounts for one-third of global tuna catches.

A single 278 kg Bluefin caught in the waters off northern Japan in January fetched a record US$736,000. The average price over the past 15 years for a single fish at the first Tokyo auction of the year was US$153,000, according to Bloomberg, although what comes in the can is obviously a lot lower-grade.

Conservationists warned in mid-2011 that five of the eight tuna species are at risk of extinction, with all three bluefin species – southern, Atlantic and Pacific – susceptible to collapse from overfishing.

In the early days of the Philippine industry, tuna were caught just a little over 100 metres from shore off Mindanao. Today, the closest they can be found in volume is a good six hours from the coastal towns of Kiamba and Maasim. On a bad day, three weeks in the open seas off Sarangani Bay will net a zero catch.

The seas off Palau, Micronesia, Papua New Guinea and Indonesia are areas closest to the Philippines where local tuna fishing companies frequently operate. The ban, however, has compounded increasing protectionist policies in Indonesia and Papua New Guinea. Immediately after the ban was announced, Philippines’ tuna producers were forced to recall their fishing fleets.

With the Philippine seas south of Mindanao already over fished, local tuna producers have looked beyond the country’s fishing grounds for their operations. In the 1990s, local tuna producers began opening up fishing operations in Indonesia and in Papua New Guinea. By the turn of the millennium, several Filipino companies had already put up canning plants in these countries known for their rich tuna fishing grounds.

As local tuna production began to decline, pressures from Filipino companies operating fishing grounds in Indonesia and Papua New Guinea for raw materials increased.

The declining catch had little impact on Filipino exporters of canned tuna who were able to set up plants in Indonesia and Papua New Guinea. As early as two decades ago, industry players have seen a steady decline of domestic catch due to over fishing and over saturation of commercial fishing operations in Philippine seas.

But while production has declined, increased international prices of canned and processed tuna as well as fresh chilled yellowfin exports are keeping the Philippine tuna industry afloat.

Edwin Espejo blogs at ‘Chronicles from Mindanao’ for Asian Correspondent, where portions of this originally appeared

Downgraded! Business analysis of PNG political situation

BUSINESS INSIDER

ALTHOUGH IT ENDED PEACEFULLY, the attempted coup marked a dangerous escalation in the long-running battle for power between Somare and O'Neill, and a worrying sign of political instability for investors, resulting in Standard and Poor's downgrading PNG's credit rating from B+ to B-.

However, it is unlikely to have any short-term adverse effects on any of the major extractive projects currently underway, and the regulatory environment for foreign investment will stay stable in the run-up to the 2012 elections.

As Somare's supporters have boycotted parliament, the current government has struggled to push forward its planned reform program ahead of the June 2012 elections.

The government had hoped to consolidate its rule through a populist program, which included a new supplementary budget worth US$353 million, which will fund free education for all children up to Grade 10, as well as improving health services and infrastructure.

In addition, an independent anti-corruption body has been established. However, the political crisis has diverted attention away from the reforms and hampered O'Neill's ability to concentrate on effective governance.

The competition for power is expected to intensify with PNG's patronage politics set to be transformed by the huge financial rewards of the major resource projects underway, such as the US$15 billion ExxonMobil PNG LNG project.

As such, the investment climate will stay positive for foreign firms, as such investments provide significant leverage for PNG politicians. O'Neill leads a coalition government, and as no single party has won enough seats to govern alone since independence it is likely that a coalition government will rule after the 2012 elections.

The current government represents a shift in power from the northern supporters of Somare, who are generally from the political generation which saw PNG's independence, to O'Neill's highland and southern support base, who tend to be from a second generation of post-independence politicians.

Furthermore, even at the best of times, PNG remains prone to political tensions during electoral campaigns and it is likely that localised violence, possibly between O'Neill and Somare supporters, will impact upon 2012 parliamentary elections. Widespread chaos and violence arose between supporters of rival candidates during the 2002 and 2007 elections.

The proliferation of guns, particularly in the central Highlands area that witnessed most of the electoral violence in 2007, is likely to pose a serious challenge to the conduct of free and fair elections in 2012.

Although there has so far been no violence between supporters of the rival O'Neill and Somare camps, the attempted coup raises the possibility of splits within the security forces and further heightens tensions.

Forecast

There is no question of the crisis jeopardizing current investments, and any future PNG government is likely to maintain a regulatory environment which is exceptionally welcoming to foreign investment.

In addition, there has been no decline in security conditions at any of the major extractive project sites, and no labour disputes or strikes. However, as a result of the coup, Standard and Poor's downgraded PNG's credit rating from B+ to B-, noting that the incident was likely to lead to a loss of donor support and to deter investment.

However, although PNG is known for its volatile politics, the main danger of the crisis could be the damage done to the legitimacy of the constitution and the courts, which are now being used as tools for political advantage.

The constitution and courts had long been the mainstay of PNG's democratic system, and the fear that their standing is being eroded by the conflict between Somare and O'Neill calls into question PNG as a country under the rule of law.

In addition, the current crisis may set an unfortunate precedent, as politicians may be more likely to turn to the military, or ignore court or parliamentary decisions, in future.

Spotter: Peter Kranz - http://www.businessinsider.com/a-map-of-emerging-global-risks-from-the-past-two-weeks-2012-2