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Business and Finance Environment

LNG from PNG

You may know that Papua New Guinea (PNG) is a tropical country located on the world’s second largest island in Oceania. You may also know that most of PNG’s 7 million inhabitants live in rural areas. You could call PNG a developing country: In the 2007 Human Development Index it is ranked 148 of 182, between Kenya and Haiti. You may¬†know that PNG is rich of natural resources, including precious metals, timber and oil. What you would not expect, however, is PNG to be a major hydrocarbon producer.

Well, it’s time to revise your knowledge.

In a joint venture with firms from Japan, Australia and Papua, ExxonMobil plans “to develop gas fields in the Southern Highlands and Western Province of PNG and transport the gas via pipeline to an LNG (liquified natural gas) facility near Port Moresby (the capital) for shipment to markets overseas. The project will provide energy for the Asia-Pacific region, jobs and economic benefits for PNG.”

Economic benefits indeed; the question is for whom. According to a study, the project will double the country’s GDP and increase its exports of oil and gas four-fold. This gigantic endeavor – total capital investment is thought to amount to $10 billion, which is as much as the country’s annual GDP – raises two questions. First: Why is PNG’s oil and gas only now being exploited so intensively? Second: What is the project’s overall impact on PNG and its people?

The PNG LNG project / Illustration: screenshot from www.pnglng.com