Daniele Liberatori

Daniele Liberatori

Associate Analyst

03/07/2018

03/07/2018

How Social Instabilities are affecting Gas Production in Papua New Guinea

In recent years, Papua New Guinea emerged as a regional extraction hub for natural gas, attracting numerous foreign companies to heavily invest in the development of its resource-rich Highlands region. These projects – which could be beneficial for both local citizens and the whole country – are now in jeopardy due to an erosion in the region’s security landscape, caused both by unaddressed social grievances and government’s inefficiencies in Papua New Guinea.

Papua New Guinea

Papua New Guinea (PNG) is a resource-rich country, with a significant extractive sector for both minerals and hydrocarbons. Although PNG oil production is declining due to the prolonged exploitation of its fields, gas extraction in the region is on the rise. Since 2014, several foreign extractive companies – lead by ExxonMobil - oriented their operations in the country towards the liquified natural gas production (LNG), exploring new fields and expanding their activities.

Nevertheless, the last months have witnessed a partial erosion of the security environment of Papua New Guinea, especially in the resource-rich Southern Highlands.  Two concurrent trends are contributing to this development: the increasing dissatisfaction of local citizens with the results of the 2017 general elections, and the inability of the central government to effectively redistribute extraction royalties to local landowners. 

Elections and Contestation 

Between June and July 2017 Papua New Guineans voted for the election of its 10th National Parliament Assembly. The electoral process quickly fell into chaos when elections officials in the capital were found carrying over $50,000 in cash. The voting procedure was temporarily suspended, ballots were allegedly stolen, and accusations of bribery were delivered from each and every political formation. Eventually a new government – lead by the People’s National Congress party – took power. However electoral irregularities, and a nation-wide delay in the ballots count, prompted the opposition parties to appeal to local courts, asking for vote re-counts in different regions, among which the Southern Highlands province.  

In October 2017 – after the announcement of William Powi’s victory and his appointment as Governor of the Southern Highlands – a first wave of protests and opposition-led rallies swept the region. Upon allegations of fraud and corruption, the issue reached the national Supreme Court, which on the 14th of June 2018 reconfirmed the appointment of Mr. Powi.

This decision sparked an outbreak of demonstrations region-wide: the same day, protesters broke into Mendi’s airport in the provincial capital, and set a private plane on fire. Two days later, two police officers were kidnapped in an ambush, and their firearms stolen. In an attempt to regain control over the area, on the 18th of June the Port Moresby government authorized the deployment of 440 army troops in the Southern Highlands, with the objective to monitor the situation and ensure the respect of the law.  

Although the measure adopted proved effective to contain the outburst of protests and avoid further escalations, it nevertheless appears to be flawed in at least two ways: its costs and its limited reach. In terms of costs, the deployment of 440 troops in the area is a measure hardly sustainable over time. The limited size of the Papua New Guinea army – counting approximately 2,500 active men – compared with the extension of the territory, requires a continuous movement of troops as to effectively patrol and maintain order in the rural Highlands area. By employing such a substantial part of the military manpower in a single region, the army would find itself in shortage of resources elsewhere across the country.

Concurrently, the effectiveness of this temporary plan is extremely limited in space. Given the dispersive nature of the territory, while the army may ensure stability in the provincial capital, it cannot avoid a spillover of tensions towards its adjacent provinces. 

Social grievances and royalties’ mismanagement  

While instabilities in the Southern Highlands are not directly affecting the gas production in Papua New Guinea and the bordering Hela Province, they nevertheless contribute to the consolidation of a tense and unstable environment in the area. The two provinces – members of the same administrative unit until 2012 – continue to share close economic and social ties, with tribes living across the regional borders, common citizens’ organizations and shared police resources. Such interconnectivity enhances a crossborder spreading of instabilities and social grievances, which adds on the local challenges citizens in the Hela province are facing. 

Landowners in the Angore and Hines municipalities – where LNG extractive infrastructures are being fully developed -  saw their lands expropriated to allow hydrocarbons companies to expand their gas production in Papua New Guinea. Although initially the central government ensured a fair compensation for the expropriation - granting a share of the extraction royalties paid by multinationals operating in the area and the creation of an Angore Development Centre to stimulate agricultural growth in the region - such promises were never fulfilled: neither the royalties’ redistribution nor the creation of the Development Centre were implemented.

Claiming the bureaucratic difficulties in verifying the owners’ actual property rights, the central government delayed payments triggering an angry response in the population. Protests and demonstration turned into vandalism. Upon the inability of Port Moresby authorities to solve the situation, dwellers decided to target the companies operating in the area.  

ExxonMobil - which holds explorative and extractive rights over the Angore municipality - was among the most affected by the protests. In the second half of June 2018, vandals assaulted multiple times the construction sites of its Angore-Hines pipeline, a project undertaken by the multinational to connect its two LNG production sites in the area. Such protests caused a further delay in the works, already halted for weeks following the 26th of February earthquake. Allegedly, the troops deployed in Mendi would also serve to counteract the increased criminal vandalism in the Hela province, but full oversight over the extraction sites is unlikely.  

A third issue of security in Papua New Guinea should finally be considered. On top of these multiple social grievances towards the government, PNG highlands are also heavily affected by fights among the numerous local tribes. Feuds among members of different kin-groups are frequent and extremely violent, leading to tens of murders which often involve also non-affiliated civilians. Additionally, the incapacity of the government to project its authority in rural areas allows the proliferation of weapons, which could be used alike against other tribes, the army or locally-operating multinational corporations.  

A way forward 

The security landscape in the Southern Highlands continues being extremely volatile, with negative repercussions both on businesses and on the local population. The path to address these challenges is complex and should unavoidably involve all the stakeholders in the region, from local tribes to international companies.

A further development of liquefied natural gas production in Papua New Guinea could create benefits for both citizens and the government – granted a fair redistribution of the extractive royalties - and could become a stabilizing force in a highly unstable region. To do so however, corporations should pressure the government to fairly honour its commitments towards the Hela landowners, while concurrently working with the provincial administration on the implementation of projects to address the social grievances in the area.

Although the disappointment for the election’s result will not fade in short time, a comprehensive strategy to increase the performances and impact of the regional government will surely be welcomed by citizens and will decrease the likelihood of further riots.

In turn, this will allow the army focus on broader regional issues. Among them, it could take an active part in the resolution of the ongoing tribal fights, as in the case of the peace agreement between the Kii and Karl tribes, which was brokered through the support of the National Polices Forces and locally deployed troops, ending a decades old feud between the two groups.  

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