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Deal in sight for PNG landowners protesting Exxon-led gas project

  • The ExxonMobil-led PNG LNG project’s Angore operations have been shut down since June due to conflict with traditional landholders in the Papua New Guinea highlands.
  • Around 97 percent of land in Papua New Guinea is held communally by clans, so development projects require a complex social mapping process. Critics of PNG LNG claim this was not carried out correctly.
  • Following the occupation of a wellhead site in July, and a threat to shut down the project permanently, landowners now say they are close to reaching an agreement with the government regarding royalties and equity.

Traditional landholders in the Papua New Guinea highlands say they finally see signs of progress in a cycle of contentious negotiations over land rights and royalties at a massive ExxonMobil-led natural gas development.

The PNG LNG project’s operations in Angore, Hela Province, have been suspended since June, when workers were evacuated after protesters set fire to construction equipment.

After months of stalled negotiations, representatives of the area’s landowners say they are now satisfied with the conflict-resolution process, and finally optimistic that an agreement will be reached in the coming weeks.

The $19 billion PNG LNG project is the largest resource-extraction venture ever to be developed in Papua New Guinea. ExxonMobil is the lead operator of the project, in partnership with Australia-based Oil Search and the PNG government-owned Kumul Petroleum Holdings Limited.

Three of the project’s wellheads are in Angore and have been the subject of conflict since 2008, when the government awarded development licenses to ExxonMobil PNG. Objections from landowners escalated in 2013 when construction started in Angore.

The situation boiled over earlier this summer. On June 21, heavily armed landowners, frustrated by a lack of response from the government, blockaded the Angore project site and damaged equipment.

Construction equipment in flames in Angore. Image courtesy of the Angore Tiddl Appa Landowners Association Inc. (ATALA).

In Papua New Guinea, around 97 percent of land is customarily owned by clans. Before leasing land to developers, the government is required to go through a process of Social Mapping and Landowner Identification (SMLI). Companies who are granted development permits are required to pay royalties into a trust fund, administered by the PNG government and distributed to landowners in accordance with the findings of the SMLI process.

As previously reported by Mongabay, the Angore landowners’ group, Angore Tiddl Appa Landowners Association Inc. (ATALA), said the government did not conduct and complete an accurate SMLI before it approved development licenses for land in Angore.

ATALA said it refused to sign any contracts giving permission for the PNG LNG project to be developed on customary land. Instead, the organization alleged that 47 people signed fraudulently on its behalf.

With those signatures in hand, ExxonMobil PNG brought bulldozers to Angore in 2013 to begin construction. The company said the government owned the land and had granted licenses for construction.

The news came as a surprise to the ATALA landowners, according to David Hayabe, a founding member of the group. The state and developers “forgot about landowners,” he said.

As compensation for the land it says belongs to its members, ATALA has demanded an “infrastructure development grant” of 32 million kina ($9.7 million), equity shareholder certificates for traditional landowners, 2 percent royalties every month, and for the government to complete SMLI clan vetting.

On June 26, following the blockade at Angore and the suspension of operations there, ATALA representatives met with government officials in Port Moresby, the capital. The government offered ATALA 20 million kina ($6.1 million) and told the group to put an end to the protests and unrest in Angore.

The meeting was an attempt by the government to stall for time, says Gary Juffa, governor of Oro province and a prominent opposition leader.

Unsatisfied with the official response, ATALA reiterated its original demands and insisted that the energy ministry and the state-owned energy company send representatives to the highlands. “They must come to Angore to talk with us and to meet with us,” Hayabe said.

ATALA told the government that if it did not act and resolve the dispute by July 18, the PNG LNG project would be closed permanently, ATALA manager Benson Pajilah told Mongabay.

“If the government don’t listen to ATALA, we have capacity to shut down Hides Gas Conditioning Plant and Komo Airport. That will shut down all of PNG LNG’s operations,” Pajilah said.

“We will shut [PNG LNG] down forever, we will burn everything,” Hayabe added. “We will blow [up] the gas conditioning plant at Hides.”

Hayabe, in light blue, holds the letter of recognition sent by the government. Image courtesy of ATALA.

According to ATALA, the government then upped its response, sending ATALA a letter recognizing the organization and stating its intention to negotiate and “release money from the trust fund held by the [government-owned] Mineral Resources Development Company (MRDC),” Hayabe said. He added that ATALA was happy with the arrangement.

Shortly after the letter was issued, and before the 18 July deadline, government representatives met multiple times with ATALA in Angore for negotiations and to complete the SMLI process. Hayabe said it felt like ATALA was finally being listened to and taken seriously.

Hayabe said a draft memorandum of understanding between ATALA and the government was now being reviewed and could be signed as soon as Sept. 7. He said he expected senior ministers to be present at the signing, including the deputy prime minister.

Hayabe said the landowners were satisfied with the conflict resolution process, and that it was a relief to be nearing an agreement after years of struggle.

ExxonMobil and the other companies involved in the project are not part of any agreements on how revenue streams are shared with landowners or branches of government, an ExxonMobil spokesperson said, adding that the company was not participating in any MoUs “in relation to landowner benefits.”

Oil Search, PNG LNG’s second-largest stakeholder, stated in its 2018 half-year results, released on Aug. 21, that Papua New Guinea’s government “is making good progress on resolving outstanding [PNG LNG] issues.”

The statement said $200 million in unpaid landowner royalties were “being held in trust” until the SMLI process for PNG LNG was complete. Oil Search said it was “continuing to support the government where it can, to ensure a speedy release of these funds to the rightful beneficiaries.”

Children hold signs supporting traditional landowner group ATALA. Image courtesy of ATALA.

The situation on the ground

Hayabe confirmed that roads in Angore that had been blockaded were now cleared. “We are so happy with the government that they responded,” he said. But he cautioned that ATALA was still “controlling everything on the ground.”

While ATALA awaits the arrival of royalty payments and the completion of the SMLI process, the organization wants to “make it clear to the state, developers and all concerned parties that Angore PNG LNG construction will be put on hold,” Hayabe said.

If a swift resolution is not reached, he warned of a repeat of the earlier “destruction.” “It will be a big problem, there will be no cars moving around, no construction,” he said.

For the use of its land to develop PNG LNG, the government owes ATALA millions, and will have to pay to ensure a peaceful end to the conflict, Juffa said.

For now, construction in Angore remains incomplete until ExxonMobil PNG is confident that work can resume safely, its spokesperson said. The company’s staff continue to be reassigned from working in Angore, and the company is closely monitoring the situation, the spokesperson said.

ATALA demanded that representatives of the government and the state-owned oil company travel to the highlands for meetings. Image courtesy of ATALA.

Finding the Money

 Oil Search reported a 39 percent year-on-year decrease in its January-June 2018 profits. It attributed the decline to a drop in shipments from PNG LNG due to the February Highlands earthquake.

The magnitude of the financial impact of the Angore unrest has still not been publicized. Despite the protests and blockades, Oil Search has signed two new deals. On July 20, the company finalized its first sale in five years, for 1.3 million tonnes a year to be supplied from PNG LNG to PetroChina. Then, on Aug. 17, Oil Search signed another supply agreement, with BP.

Oil Search also said that ExxonMobil PNG was in the midst of numerous negotiations for new LNG supply agreements, to be completed in the near term.

Those deals won’t necessarily translate to easily available cash for landowner payments. On Aug. 11, the Wall Street Journal reported Papua New Guinea’s treasurer, Charles Abel, saying that despite the state’s heavy investments in PNG LNG, “we have not had the corresponding revenue growth.”

It also reported that Prime Minister Peter O’Neill said in response to questioning in Parliament that “royalty payments for landowners of the PNG LNG project will only be released after proper landowner identification is completed through the clan-vetting process.”

This story was updated Sept. 3 to clarify that only operations at the PNG LNG site in Angore have been suspended.

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