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Source: www.asiaecon.org |

PNG LOOKS TO BECOME A MAJOR PLAYER IN THE ENERGY MARKET


Papua New Guinea's (PNG) abundant natural resources, combined with several international energy consortiums, are propelling it to the forefront of the energy market. PNG has long been known for its gold, copper and silver mines, but now it looks to become a major player in the energy market by utilizing its Liquefied Natural Gas (LNG) resources.


Papua New Guinea’s (PNG) abundant natural resources, combined with several international energy consortiums, are propelling it to the forefront of the energy market. PNG has long been known for its gold, copper and silver mines, but now it looks to become a major player in the energy market by utilizing its Liquefied Natural Gas (LNG) resources.

Despite its abundant natural resources, PNG has been slow to enter the LNG market. Poor infrastructure, rugged terrain and a mainly rural population has led PNG to be largely unexplored. Furthermore, a chaotic system of land title, which makes identification of land owners difficult, has kept away most foreign investment. But in the past few years, it has become economically feasible for foreign companies to enter PNG and invest heavily.

Oil Search Limited was the first company to invest heavily in PNG. Incorporated in PNG, it is the largest company and producer of gas and oil in PNG and has a market capitalization of around $6 billion. In 2007, Oil Search Limited was responsible for generating 16 percent of PNG’s GDP and 22 percent of its export revenue. The government of PNG is also heavily invested in the company, holding a 17.6 percent interest.

PNG LNG Inc. was the next company to enter PNG for its natural gas. The Bahamas-based parent holding company of Liquid Niugini Gas Ltd, is equally owned by InterOil Corp., Merrill Lynch Commodities, Inc., and Pacific LNG Operations Ltd., with the inclusion of the PNG government. The estimated $7 billion project is expected to be completed in 2012. The LNG will be built near Port Moresby, right next to other LNG projects, with a capacity of 9 million tons of LNG per year.

Additionally, the most recent inclusion to the LNG market in PNG is the project called PNG Gas. Led by ExxonMobil, the project was originally planned to transport gas directly to Australia via a 2,500 miles offshore pipeline. However, in 2007, the pipeline project was suspended and plans now call for transport of the gas to Port Moresby. The total project, expected to be completed in 2013-2014, will cost approximately $10 billion..

Along with the big three companies, there are many other small foreign companies that are entering PNG. For example, the Australian company Interoil Corp. has just found the largest continuous reservoir of gas in the country, larger than any well in the United States. Managing director Phil Mulacek spoke of the quality of the resource saying, “Internationally it will put PNG on the map.”

With the large influx of foreign investment for LNG, the benefits to PNG should be immense. The PNG LNG project alone is expected to double the island’s GDP. Furthermore, there should be substantial job creation. Although there has been no mention of local hiring practices, the PNG LNG project will support over 7,500 jobs during construction and 850 jobs during production.

Despite the growing wealth of the PNG government, some believe that there will be no immediate benefit for ordinary citizens. PNG is among the most impoverished in the world, with rampant illiteracy, unemployment and poor health. With about 40 percent of the population living on less than one dollar a day, the UN Human Development Index ranks PNG 145th out of 177 countries.

In fact, some similar projects in the past have actually worsened the situation. Over 85 percent of the country survive on subsistence-based agriculture. Some projects in the past have had severe environmental damage. The most famous example was the Australian firm BHP’s dumping of 80,000 tons of rock waste directly into rivers every day for 20 years. It has been estimated that the clean up will take over 300 years.

Although many ordinary citizens of PNG will not benefit immediately, as long as environmental protection is observed, the influx of foreign investment should be good for PNG. The large amounts of money the government will receive for having interests in every LNG project will help stabilize the economy. Increased government spending in education, health and infrastructure can help improve the lives of many citizens of PNG for the future.


Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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