Exxon's Papua New Guinea LNG Ready To Ship, While Landowner Royalties Undecided

Exxon Mobil’s (NYSE:XOM) first liquefied natural gas exports from its Papua New Guinea facility will ship to Japan any day now, while the PNG government has yet to identify landowners to get royalties.

The $19 billion project is expected to produce nearly 7 million tons of LNG per year, and is the small island country’s largest private sector investment to date, expected to more than double PNG’s GDP and triple export revenues, according to research contracted by Exxon.

The first gas will ship to Tokyo Electric Power Co., a utility increasingly relying on LNG after the 2011 Fukushima disaster that brought a moratorium on nuclear power in Japan.

"This is the defining moment to show the world just what Papua New Guinea is capable of," Peter Graham, managing director of ExxonMobil PNG Ltd, the operator of the project, said Wednesday at the LNG vessel Spirit of Hela’s loading event, according to Australian News Network.

PNG’s Prime Minister Peter O’Neill has also praised the project.

The PNG government has received criticism from locals for using a process called “clan-vetting” to decide who can claim royalties from the gas production. Tens of thousands of people are waiting and expecting to receive money, but the government must first identify all landowners, a process that’s taken five years already without resolution.

"Anybody from Papua New Guinea can claim their clan as part of project areas they come from," said Stanley Mamu, administrator of the non-government organization PNG LNG Watch. "The problem that will cause for the future is that it's not a proper identifying of that clan, so anybody working with the Department of Petroleum and Energy can put his clan into that clan-vetting and claim that he is the landowner and he will get benefits from that project."

Complaints about the extent and accuracy of the PNG government’s social mapping and landowner identification studies are “widespread,” according to non-profit Oxfam International.

“PNG relies heavily on its natural resource wealth for overseas income,” a 2012 Oxfam report on Exxon’s LNG project reads. “However, it has struggled to take full advantage of this abundance and, in some cases, has suffered serious environmental and social harm in the wake of resource development.”

Mamu launched PNG LNG Watch to raise awareness of the “illegalities” of the multibillion-dollar LNG project, which he says the government and developers agreed to without the consent of landowners.

Oil and gas lawyer Alfred Kaiabe, from the Hela province where Exxon’s project is located, told PNG LNG Watch that the clan-vetting system has no legal basis.

Royalty money is being held in a trust until the Petroleum and Energy Ministry makes a final determination of the list of landowners, according to the PNG government.

The prime minister is expected to reveal more details of the clan-vetting process when he tours the project’s sites this month.

In 2012, a landslide swept over an Exxon quarry and killed 47 Papua New Guineans near the gas project, even after an independent expert report had questioned the safety of the excavations.