THE economic benefit of Papua New Guinea's biggest natural resources project has been questioned, with a report warning that ordinary citizens risk missing out because of corruption and contracts that favour the lead proponent, ExxonMobil.
A report by anti-poverty group Jubilee Australia, to be released Wednesday, examines the predicted economic benefit of PNG's liquefied natural gas project and the Australian government's provision of $500 million towards it.
The report highlights endemic corruption in PNG and warns that a government sovereign wealth fund and other official bodies established to handle billions of dollars in revenues could be defrauded.
"The governance and public life of PNG are to this day beset by political intrigue, self-interest of politicians and gross misuse of public funds," the report warns.
Scheduled to begin production in 2014, the LNG project is valued at $22 billion and predicted to double PNG's gross domestic product.
Australian companies Santos and Oil Search are prominent players in the joint venture project led by US giant ExxonMobil.
The report by Jubilee Australia - whose supporters include World Vision and the National Coalition of Churches - includes allegations that the PNG government was "pressured into the signing" of agreements by the joint-venture companies.
Former PNG attorney-general Allan Marat is quoted in the report as saying he and his office had less than 24 hours to analyse a 200-page agreement before determining whether it was in the best interests of his country. "This gas agreement was drawn up overseas. It was taken away from our government negotiating team and structured overseas. And, we are now forced to dance to the music of foreigners," he said.
In response to questions from Jubilee Australia, ExxonMobil disputed the claims and argued that the fast negotiations could be explained by the fact the PNG government relied on many of the same fiscal terms as previously agreed to in a defunct 2006 proposal.
The report found mixed economic benefits for PNG people as a result of the massive investments already being made for the project.
It stated that although PNG citizens fortunate enough to have been directly employed by the project had reported that their livelihoods had improved, there was a strong view that "an educated and well-connected elite" had captured most of the benefits.
Using the results of a 2011 study by New Zealand's University of Otago, the report found the project was also leading to increased tensions among landowners in the PNG southern highlands and a phenomenon known as "bride price", where the groom's family makes a payment to the bride's family.
The expectations created by the perceived extra wealth being directed into local communities was increasing this price, making "it more difficult for many young men to marry".
The report also highlighted an increase in "destructive social practices", with the influx of temporary workers and money leading to more gambling, prostitution, drug and alcohol abuse problems.
Increasing environmental incidents have also been noted. The most recent was a January mudslide at a quarry that killed at least 26 people, mainly migrant workers. The quarry had been used by a company working on the project until mid-2011.
The Australian government's decision to contribute a $500 million loan to help the financing of the project has also been criticised in the report. The loan by Australia's Export Finance and Insurance Corporation was made on the basis that Australian equity in the project was about 43 per cent and there was $1.5 billion of procurement contracts available to Australian firms.
EFIC used what is known as "the national interest account" to fund 80 per cent of the loan. As such, nearly all the documents it holds on the assessment process for the PNG loan are exempt from freedom-of-information scrutiny.