Daily Archives: April 19, 2011

Papua New Guinea: Developing independent policy for regional aid.

image

18 April 2011

Opposition deputy and foreign affairs spokesperson Julie Bishop‘s recent comments about the role of Chinese aid in the Pacific has opened a can of worms.

Her proposals are inspired by a Lowy Institute report China in the Pacific, which suggests Australia partner with China on aid delivery projects in the Pacific.

Bishop was quoted as saying:

“We’re not going to be able to crowd them out with aid, but what we could do is join with them and be part… of their push into places like PNG.”

The argument goes something like this:

China delivers aid in the region in an apparently haphazard way that undermines internationally coordinated responses to issues such as countering corruption, efforts to strengthen governance and develop local ‘capacity’.

In fact, China ignores internationally normative ‘governance’ questions such as corruption and human rights, delivering aid and malleable ‘soft loans’ in an effort to advance narrowly defined national interests.

The suggestion that Australia, as the most significant aid provider in the region, should engage the Chinese in established international norms of coordinated aid delivery is consistent with ideals about Australia being a good international and regional citizen.

But the proposal flies in the face of established conventions and practices of Australian foreign policy.

The Australian’s guardian of this ‘realist’ foreign policy mainstream, Greg Sheridan, for example, is appalled by Bishop’s statement. He has tarred Bishop’s ideas as a ‘nonsensical thought-bubble’ and laid responsibility for the ideas with the Lowy Institute which, in his view, has no place in the cut and thrust of international politics.

For Sheridan, Australia’s only role as a middle-power in the Pacific is to remain firmly and loyally wedded to the American imperium.

While I doubt we’ll hear Bishop repeat the Lowy Institute proposal, her contribution should be welcomed for opening a broader discussion about Australia’s role in the rapidly-changing region.

Bishop is right to suggest that Australian foreign policy should engage much more actively with the region and avoid the tragic distraction of US wars far away. Where Bishop, the Lowy Institute and the realist mainstream might be wrong, is in understanding what is already going on in PNG.

In particular, it neglects the deep unrest at the ‘grasruts’.

One source of grassroots unrest is the $US16.5 billion Exxon-Mobil led consortium bringing gas from the Southern Highlands to a processing plant in Port Moresby and on to energy-hungry markets in Asia. This is the big development story in PNG today.

The 30-year project is expected to generate $US5.6 billion in royalties, taxes and dividends lifting PNG from its lowly ranking at 148 (out of 182) nations in the UN Human Development Index. The hope is that it will bring quality schools, healthcare and infrastructure to people across the country.

The first indications are not good. Landowner groups are demanding transparency from the agency which distributes their royalties apparently at whim, and provides no accounts or explanations of hefty ‘management fees’.

At the local level, royalty disputes have already led to acrimonious community divisions with at least 15 reported shooting deaths at either end of the pipeline, and construction sabotage and stoppages at the well.

The consortium appears to have washed its hands of the royalty distribution issue, preferring instead to talk up its distribution of 14,000 anti-malarial mosquito nets to pipeline communities in glossy ‘social and environmental impact statements’.

Meanwhile, the Chinese-run Ramu Nickel mine has led to even deeper resentments. There is deep community unrest over the damage being done to the Ramu river catchment and the authoritarian and contemptuous response at the mine to local concerns. The regional capital Madang has seen big anti-Chinese riots, as have parts of the highlands where a new wave of small-scale Chinese entrepreneurs are bitterly resented.

As the US-China dynamic becomes more complicated and control of regional resources more crucial, ‘middle power’ Australia needs to make some principled, long-term choices. One of those would be recognising that Australia’s long-term national interest lies with supporting local communities and emergent civil society organisations which have the resilience to weather the approaching storms and perhaps call their governments to account.

This will mean stepping out of the shadow of whichever great power we habitually attach ourselves to, and having a truly independent foreign policy. I don’t think that’s a ‘thought-bubble’ Bishop, Sheridan or the Foreign Minister Rudd can even begin to imagine.

Peter Phipps

Dr Peter Phipps is a senior lecturer in Global Studies and a researcher with the Globalism Research Centre at RMIT University.

Original Article

LNG Project – Papua New Guinea – PART III

image_thumb_thumb

Financial Institutions involved

Banks

ANZ profile

  • approached/interest: (October 2009)
    source: Post Courier (Tuhome.htm)

Bank of Tokyo Mitsubishi UFJprofile

  • project finance: project finance: participating in syndicated loan of US$ 1.8 billion (December 15, 2009)
    source: Index.html

BNP Paribasprofile

  • approached/interest
    source: Finance International (November 04, 2009)

China Development Bankprofile

  • approached/interest
    source: Finance International (November 04, 2009)

Crédit Agricole profile

  • approached/interest: (November 11, 2009)
    source: Finance International

DnB NORprofile

  • approached/interest
    source: Finance International (November 04, 2009)

Intesa Sanpaoloprofile

  • approached/interest
    source: Finance International (November 04, 2009)
  • project finance: participating in sydicated loan of US$ 900 million (December 15, 2009)
    loan covered by SACE

Mizuho profile

Natixis profile

  • approached/interest
    source: Finance International (November 04, 2009)

Société Généraleprofile

  • advisory service
    Acting as Financial Advisor
    source: Reuters Basis Point (July 30, 2009)

Standard Chartered profile

  • approached/interest
    source: Finance International (November 04, 2009)

Sumitomo Mitsui Banking Corporationprofile

  • approached/interest
    source: Finance International (November 04, 2009)
  • project finance: participating in syndicated loan of US$ 1.8 billion (December 15, 2009)
    source: Index.html

UniCredit Groupprofile

  • approached/interest
    source: Finance International (November 04, 2009)
  • project finance: participating in sydicated loan of US$ 900 million (December 15, 2009)
    loan covered by SACE

Westpac Banking Corporationprofile

  • approached/interest
    source: Finance International (November 04, 2009)

multilateral development banks

Asian Development Bank (ADB)

export credit agencies

Export Finance and Insurance Corporation (EFIC)

Export-Import Bank of the United States (Ex-Im Bank)

  • approached/interest
  • corporate loan: US$ 3 billion (December 4, 2009)
    financing subsidies to Exxon

Italian Export Credit Agency (SACE)

Japan Bank for International Cooperation (JBIC)

French investment bank Societe Generale is acting as financial advisor. ADB provided some early on technical assistance.

In December 2008, ExxonMobil met with up to 70 representatives from credit agencies and banks. So far, it has been reported that up to $2 billion in financing will come from 17 interested banks, including four Australian banks (CBA, NAB, Westpac and ANZ). Read more.

JBIC, Ex-Im, EFIC along with other ECAs have pledged about US$8.3 billion in financing, with Ex-Im having announced its support for the same amount, making it the largest financing subsidy in its 75 year history.

applicable policies

Equator Principles should apply to this project.

LNG Project – Papua New Guinea – PART II

image_thumb

Dodgy Aspects

Social Impact

The project´s Social Impact Assessment (SIA) indicates that an estimated 80% of the construction workers will be expatriates, meaning a large influx of workers can be expected to pose the same risks as were manifested on other similar projects of this scale. The influx of thousands of mostly male workers who are necessary to construct the project can lead to an increase in violence and sexually transmitted diseases in local communities and an increase burden on community health, human services and other social infrastructure.

The impact of HIV/AIDS can be a two-way catastrophe, with increased exposure from expatriate workers to local people and from local people to expatriate workers who then move on to infect other people in other countries once they leave the project area.

The PNG LNG project will result in involuntary resettlement, including resettlement of indigenous people. Up to date an involuntary resettlement plan and a draft Indigenous Peoples Resettlement Plan has been completed, despite the fact that irreversible project decisions may have already been made and construction is soon to commence, if not already started.

Environment

Onshore pipleline impacts:
Construction of the onshore pipeline will have significant and irreversible environmental impacts on the existing environment. Environmental impacts from construction of pipeline Right of Way (ROW) include stripping of native primary forest and other vegetation of varying conservation value, exposure of top soil causing erosion and potential soil contamination from the construction process.

In order to install the onshore pipeline a total of approximately 2,809 ha of land will be cleared, half in areas not previously disturbed by oil and gas developments. A Right Of Way (ROW) of 30m to 60m will be required and the pipeline will cross 26 major water crossings, 138 minor water crossings and will cross the Kutubu Wildlife Management Area.
A 10m ROW will be retained for access road to the pipeline after completion of the pipeline. 1055 hectares of primary tropical forest will be cleared and an estimated 86% of primary tropical forest losses and 82% of losses in Classes A1 and A2 (1,220 ha) are concentrated in five broad vegetation groups.
Erosion is specifically an issue in areas of step grades (20%-50%) and may result in increased sediment in waterways and erosion.

Offshore pipeline impacts:
The PNG LNG project also proposes a 407 km offshore pipeline from Omati River Landfall to Caution Bay and a new LNG facility in Port Moresby. The pipeline will traverse the Gulf of Papua. Impacts from the laying, testing and operation of the pipeline include increased sedimentation rates resulting from trenching. Increased sedimentation reduces light penetration and stunts growth of marine biota.

Plant and Infrastructure impacts:
LNG liquefaction plants typically rely on their own supply of gas as a source of power to supercool gas for export. The use of this gas as a power source results in pollution emissions of NO2, SO2 and PM10.

The PNG LNG project is anticipated to have significant greenhouse gas emissions, contributing to climate change.

Human Rights

Security concerns:
Papua New Guinea (PNG) landowners and other non-state actors have increasingly expressed frustration over the PNG LNG project’s potential impacts and lack of adequate benefits sharing. The recent incident of landowners commandeering a gas plant obviously raises the potential for similar or more direct action aimed at PNG LNG that the company and the PNG government could perceive as a security risk. Invariably, under such circumstances private or public security services will be retained to protect perceived assets. Unfortunately, there is a long history of such security forces committing severe human rights abuses, especially on extractive industry projects, including by some of the corporate actors associated with this project. Such a potential for violence and human rights abuses also greatly increases a diverse set of risks for potential public and private financiers.

Other Issues

Corruption concerns:
Recently, a front end engineering and design contract was awarded to Eos, which is a joint venture of the Australian firm, WorleyParsons, and the US firm, Kellogg, Brown and Root (KBR). On September 3, 2008, Mr. Stanley, a former CEO of KBR, pleaded guilty to helping orchestrate a scheme involving $182 million in bribes paid to secure engineering, procurement and construction contracts for the Nigeria LNG project, Bonny Island, Nigeria. In February 11, 2009, KBR pled guilty and agreed to pay jointly with Halliburton $579 million in penalties in the second largest Foreign Corrupt Practices Act criminal fine in history.

Now, KBR is playing a similar contractor role on PNG LNG. Potential funding of the project will benefit KBR and will send a message that corruption is being rewarded, rather than punished.

PNG is already one of the most corrupt countries in the world, and the oil and gas sector is, along with the forestry sector, beset with corruption. So far, the PNG government has steadfastly refused to sign the Extractive Industries Transparency Initiative (EITI), the international standards that require signatory governments to publicly report revenues from oil, mining and gas ventures so as to decrease the opportunity for corruption and waste by state officials. By remaining a non-signatory of these standards, the PNG government officials are keeping themselves outside of any requirements to be transparent about how to spend the windfalls that will be coming to PNG.

Oversight for the LNG Project is in the hands of Arthur Somare, Public Enterprises Minister and son of the Prime Minister Michael Somare. In theory, the PNG Governement’s 19% stake in the deal is supposed to be controlled by the state-controlled oil and gas corporation Petromin.

However, control of the PNG LNG project has been handed over to the Independent Public

Business Corporation (IPBC). The IPBC, it is alleged, is controlled by Arthur Somare, who will therefore be able to control be able to direct the dispersal of the revenues once they start to flow into the country. Somare was able to raise the PNG Government’s stake in the project by securing a billion-dollar loan from the Abu Dhabi Government, for which he has been criticised.

Part III

LNG Project – Papua New Guinea – PART I

Ongoing Campaign Effort

last update: Apr 14, 2011

image

Proposed LNG liquefaction and Storage Facility

Description

Liquified Natural Gas (LNG) is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume for transportation by ship to destinations not connected by pipeline.

The PNG LNG project aims to exploit gas resources of the PNG Southern Highlands and sell the resulting LNG (Liquified Natural Gas) on the open market, particularly to Asia. This will be the largest industrial/development project in PNG’s history – it is projected to completely transform the PNG economy. It is one of the largest, if not the largest, development project in the Pacific region, excluding Australia. The official economic impact survey commissioned by the project sponsors claims that it will double the size of the PNG’s Gross Domestic Product.

The project will draw on the gas resources of the Hides, Angore, Juha, Gobe, Moran and Utubu fields. It is expected to have a life-cycle of 30 years with production beginning in 2013. The US$15 billion project involves construction of:

  • A gas pipeline running onshore from Juha to Hides, then to the coast near Kopi, then offshore to the LNG plant site.
  • New onshore production facilities in the highlands, including a production facility at Juha and a conditioning plant at Hides where the condensate from the gas will be collected and transported by pipeline to Kutubu.
  • A LNG processing and liquefaction plant near Port Moresby, plus a nearby export jetty and numerous marine offloading facilities.

Full construction in planned to commence early 2010 and first LNG sales are due early 2014. Long-term supplies have been secured to CPC Corporation in Taiwan, Osaka Gas Limited Company, Tokyo Electric Power Company Limited, and Unipec Asia Company Limited, a subsidiary of China Petroleum and Chemical Corporation. The project will have a capacity to produce 6.3 million metric tons of the fuel a year.

Current Status (Jun 10, 2010)

The final deal between the project sponsors and the PNG government was signed on 8 December 2009, the day of the Final Investment Deadline (FID). After completion of the financing arrangements in March 2010 the project moved into a full execution phase. The overall PNG LNG scheme is now at an early stage of a four-year construction period. At the current time design, pre-mobilisation and early site works are underway.

Approximately 60,000 landowners are estimated to be directly affected by the project. PNG law mandates that all investment deals include benefit sharing agreements between landowners, the government and the company. One week before the FID, hardly any landowner groups had signed benefit sharing agreements.

Brief History

On December 15, 2009 the Italian export credit agency, SACE agreed to cover 900 million Euro for contracts to Saipem and Nuovo Pignone, which are financed by Banca Intesa and Unicredit. Thus SACE is financing the project through the project finance component.

On December 15, 2009, The Japan Bank for International Cooperation (JBIC) signed a loan agreement in the aggregate amount of up to 1.8 billion US dollars to be implemented in Papua New Guinea (PNG) with its project company, Papua New Guinea Liquefied Natural Gas Global Company LDC. The loan, provided in project financing is co-financed with a commercial bank syndicate (including Sumitomo Mitsui Banking Corporation, Mizuho Corporate Bank, Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd.) and overseas export credit agencies (including The Export-Import Bank of the United States, The Export-Import Bank of China, SACE S.P.A. in Italy, Export Finance and Insurance Corporation in Australia) and Nippon Export and Investment Insurance (NEXI).

On December 8, 2009, the Australian goverment agreed with a $US500 million loan. The loan is to be provided to the project sponsors through Australia’s Export Finance and Insurance Corporation (EFIC).

On December 8, 2009, the final deal between the project sponsors and the PNG government was signed, the day of the Final Investment Deadline (FID).

On December 4, 2009 the U.S. Ex-Im Bank’s approved the project and the provision of $US3 billion in financing subsidies to Exxon. Read more…

Companies Involved

companies

ABBprofile

BAM Clough Joint Venture

D’appolonia

Esso Highlands Limited

ExxonMobilprofile

Mineral Resources Development Corporation

Oil Search

Petromin

Santos

The project has four major sponsors: ExxonMobil through its subsidiary Esso Highlands (33.2%); the Australian companies Oil Search (29%) and Santos (13.5%); and, the combined s take of PNG state corporation Petromin Holdings Ltd (0.2%) and the Minerals Resources Development Corporation (2.8%).The final deal between the project sponsors and the PNG government was signed on 8 December 2009, the day of the Final Investment Deadline (FID).

In June 2009 Esso Highlands Ltd (a subsidiary of Exxon Mobil Corporation) awared the Eos Joint Venture (an unincorporated joint venture comprising WorleyParsons and Kellogg Brown & Root) an agreement covering Project Services for the PNG LNG Project. The agreement commenced in March 2009 and extends to the end of 2014. Read more.

The banks consultant, D´Appolonia, an Italian engineering consulting company, served as the Independent Environmental and Social Consultant (“IESC”) to the lenders.

Part II

Ex-Im Bank Financing for Papua New Guinea LNG Project to Generate Significant Revenue for Island Nation, While Employing Workers at Dozens of American Companies

December 14, 2009

WASHINGTON, D.C. The Export-Import Bank of the United States (Ex-Im Bank) has approved the largest financing transaction in its 75-year history — $3 billion to support U.S. exports for a liquefied natural gas (LNG) project in Papua New Guinea. Workers at over 55 U.S. companies will provide goods and services for the project.

Ex-Im Bank, the official export credit agency of the United States (ECA), five other ECAs and 17 commercial banks will provide financing for the project. Total project costs are estimated to be $18.3 billion.

The project has the potential to double the gross domestic product of Papua New Guinea.

“Our approval of this project is yet another demonstration of how Ex-Im Bank is achieving its mission to provide financing for U.S. exports, and supporting U.S. export-related jobs, by supplementing what commercial lenders are able or willing to provide” said Ex-Im Bank Chairman and President Fred P. Hochberg.

The ECAs and commercial lenders involved in financing the project conducted extensive research into the potential impacts of the project. The resulting study found that the production and export of LNG from this project will represent a net reduction in global greenhouse gas emissions compared to the case where customers were to meet their energy requirements by coal, fuel oil or diesel commonly used in the regional market, even though the project will add to Papua New Guinea’s total emissions of greenhouse gasses.

At the ceremony announcing the investment, Papua New Guinea Prime Minister Sir Michael Somare said, “ExxonMobil and our other private sector development partners have shown significant confidence in our nation. Cooperation between the public and private sectors will create value for the Papua New Guinea society as a whole and grow our economy in the future.”

The project will involve development of upstream natural gas fields, a 692-kilometer onshore and offshore pipeline, a 6.3 million metric-tons-per-year liquefaction plant near Port Moresby, the capital of Papua New Guinea, and marine facilities from which the LNG will be shipped to foreign buyers. The project will sell the LNG in the large Asia-Pacific market.

In fiscal year 2009, Ex-Im Bank authorized more than $21 billion in support of U.S. exports overall, the highest level in the Bank’s 75-year history, to help ease tightened liquidity during the economic crisis. Ex-Im Bank also set a record for financing of small business exports at $4.36 billion in fiscal 2009.

The Bank, an independent, self-sustaining federal agency, helps to create and maintain U.S. jobs by financing the sale of U.S. exports, primarily to emerging markets throughout the world, by providing loan guarantees, export-credit insurance and direct loans. More information is available on the Bank’s web site at www.exim.gov.

Original Article

%d bloggers like this: