Saturday, December 12, 2009

The Papua New Guinea LNG Project: A Financial Tsunami?

The PNG Government and the developers of the giant LNG project signed the Final Investment Decision (FID) on 8th December 2009 as initially planned. With this, the project is set to go ahead. The US$16 billion project is set the transform the economic landscape of the country.

I am however sceptical about the project’s impact on the people of PNG, in particular the owners of the traditional land upon which the gas will be piped, all the way from the Southern Highlands through Western and Gulf Provinces to the processing plant in the Central Province. Hundreds of millions of kina will be paid out to these landowners in royalties over the next 30 years.

My fear is that the people are not emotionally and psychologically prepared to handle this money, so the money will actually become curse rather than a blessing.

We just read this week that the landowners in Southern Highlands went on a drinking and shopping spree after the Licensed Based Benefits Sharing Agreements (LBBSAs) were completed. It was reported that all the liquor outlets were emptied of stock, and many road accidents happened. I believe this is a sign of things to come.

I fear that the following will happen in the project areas:

• Drunkenness and associated social problems will increase;
• Most marriages will break up as men become polygamous;
• HIV/AIDS will increase, especially as men with money seek to satisfy their lust;
• Many children will refuse to go to school;
• Churches will close their doors as commitment levels drop;
• Disputes, quarrels and even all-out wars within landowning groups will intensify as the leaders of these groups, driven by greed and selfishness, benefit more than the rest of the members;

In a nutshell, when the project expires in 30 years’ time, it will be as if a tsunami had swept through the project areas. It will leave a lot of broken lives and social problems in its wake.

Why do I say this? It is basically because Papua New Guinea is a nation of consumers. All we know about money is spending it. We don’t have a saving culture. And investing money is a foreign concept.

Given that this is the situation, what will happen when people who have dealt with only small amounts of money in their lives now have thousands available to them? I believe that they will not hesitate to spend the money. The thinking will be: “Why think about saving and investing when there is a continuous stream of money coming for the next 30 years?” It will lead to a situation where money gets spent faster than it comes, resulting in the majority of landowners getting into debt to sustain their lavish lifestyles.

I understand this is what has been happening with landowners at Ok Tedi and other gold mines, as well as landowners of oil palm and forest projects. Landowners at Misima lived like this and are suffering today. The gold rush at Mount Kare led many landowners to spending lavishly. There were stories of some of them buying brand new vehicles in Mount Hagen with cash, getting them smashed and leaving the vehicles on the roadsides as they returned to the car dealers to buy new vehicles!

It is based on these observations that I am saying the LNG project will not do much good for the landowners. I may be wrong. Only time will tell.