Landowners from the Hela region in the PNG highlands have threatened to do just that if the PNG government does not deal with a long list of grievances.
With the death of a local Chief tensions are rising and landowners are saying immediate action is needed or the consequences will be serious.
In his first in-depth interview since the PNG LNG project began, Project Managing Director Peter Graham, says that overall ExxonMobil has had a very good experience of investing in PNG.
Speaker:Peter Graham, Managing Director, Esso Highlands, the ExxonMobil subsidiary building the PNG LNG project
GRAHAM: Obviously making an investment of this size, some 15 billion dollars, we looked very carefully before we started at the security of investment in the country. Papua New Guinea has a strong history of honouring all the agreements it makes with investors and certainly that has been our experience. We feel very confident that the agreements we have in place with government and with landowners are agreements that have been put in place in good faith and that there is a genuine commitment to stand by those agreements.
GARRETT: So what is the PNG LNG project contributing to Papua New Guinea in terms of governemnt revenue, jobs and business opportunities?
GRAHAM: In the long-term the impact is quite substantial on the economy of PNG. ACIL Tasman did an independent study some years ago that suggested GDP would double as a result of the project and, I think, over the life of the project the state take, or state revenue from the project, is something like $US30 billion - so very very substantial over the 30 year life of the project. But if you look just very near term at the impact of the project during the construction phase. Obviously there is a very large impact on employment. Today, we are employing something like five and a half thousand national citizens working on the project and we are spending substantial amounts of money in the country. To date its about K2 billion or around $800 million dollars has been spent project to date, has been spent actually in PNG. You only have to look around the country to see the positive impact the project is having.
GARRETT: Turning now to deliveries - your first delieveries are expected to take place in 2014. What are the biggest challenges the project faces in getting up to that point?
GRAHAM: 2014 fourth quarter is our plan for our first cargo to sail out of Caution Bay. The biggest challenges, I think, are really land access looking foward, to make sure that we have continuing access to the land and an ability to get on and deliver the contruction part of the project on time. We have an election which is coming up next year in mid-2012. In some ways the timing of that could not be much more challenging - it happens to be at the same time that our construction activities peak and typically that is a change in the pace of life for people in the communities. So we've got a few issues like that that sit out in front of us that - again its getting access to land and security within the communities within which we operate. We know how to execute a project, or more correctly our contractors do, it is just executing the project in the context of Papua New Guinea.
GARRETT:The government went through an exhaustive benefits sharing process but there are still landowners saying that they missed out. How much of a challenge are landowner expectations, to the project?
GRAHAM: It is something we continue to manage. A lot of it is about communication. I think it is an area we have underdone some, as has the government, in just really making sure people fully understand what their entitlements are under the Oil and Gas Act and under the agreements that have been struck, and then to manage those expectations. The government went through an extraordinarily consultative process in reaching those agreements. It is something I have never heard of anywhere else in the world to bring together two and a half thousand landowners, for six weeks, to negotiate an agreement. That was achieved and that was phase one, and then there was subsequently licence-based agreements that took those same negotiations back within the licence to figure out how the benefits within a licence would be shared out with all the people there. Inevitably there are going to be some people who feel like they didn't get their full entitlement and I just think we need to keep on communicating with people about how it is shared that way, why it is shared that way and why that is fair and reasonable.
GARRETT: When you say your communication might have been a little underdone - what have you done to change your approach since then?
GRAHAM: We've put a major effort in through our land and community affairs organisation, in particular, to get more people on the ground talking to people on a daily basis so that, firstly, they understand what is coming with the project rather than speculating as to how it is going to impact them so better flow of information to them. But, also, we've formalised our grievance process so that anyone who has a grievance is able to bring that grievance into our land and community affairs people and we commit to get back to people with an answer. It is not necessarily going to be the answer they are looking for, but they will get an answer.
GARRETT:So have people taken advantage of that grievance process and what has the outcome been?
GRAHAM: It's been very positive and our clearance rate has improved as we've got better at capturing and understanding grievances and then feeding back information to people. I won't say everyone is happy again, but just the fact that we've been able to establish places for people to take their grievances, processes to work them through and a feedback mechanism. I think the other thing that has changed, very recently, is that the government has now stepped up and they've placed some people in the field to deal with grievances that belong to government, rather than ourselves the developer and for a long time that was challenging because there was no-one there.
GARRETT: Yes, in fact the landowners I have spoken to are most angry about the failure of the government on business development grants and other money issues and they are actually threatening to shutdown the project. How much of a concern is that to you?
GRAHAM:If they were to shut it down it would obviously be of great concern and it certainly becomes an even bigger concern as we get more and more workers in the field. The impact is obviously greater. My sense is rightly or wrongly that we have very strong support from the grassroots people, in the community. They want to see the project succeed but they also want their entitlements from government. I think government is addressing that issue, admittedly belatedly. I think government recognises the issue and it trying to do something about it.
GARRETT: This seems to be an escalating situation in terms of anger on the landowners part - at what point does it become a serious threat to the project?
GRAHAM: I just hope we don't get there and I am pretty confident that the government has seen that in the course of the last several weeks.
GARRETT: The government has a lot on its plate with the many new projects in the country. Does it have the capacity to deal with this?
GRAHAM: I think the answer is they are trying very, very hard to make sure they meet what our needs are and what the needs of other projects are. I think you hear a lot of criticism of government and probably not enough at-a-boys for the things they are doing well. Just as a for example, work permits and visas, on the immigration side of things. They worked very closely with our people and with our contractors, to understand the need and the profile of people coming in. We've seen on average work permits and visas issued in less than 10 days - to us that is world's best practice. Customs, likewise, has done what we think is an outstanding job, customs and quarantine in moving equipment and materials across the docks. I think there are areas were there is very substantial progress by the government agencies, and there are some areas that need to improve, and they are the ones we are focussed on right now, particularly as we move towards the election, because that is going to stress things even more.
GARRETT: In terms of the landowner isues - what would you like to see the government do to lift its game?
GRAHAM: I think the best thing government can do right now is to put more people in the field and get the agencies talking with nthe landowners directly. I think that is the largest source of frustration that what landowners have felt obliged to do, is to come down from the field to Port Moresby and try and get access to people in Port Moresby. That is not the right answer. Government agencies need to be in the field dealing with people because that brings a natural transparency to that engagement between landowners and government. There are people who do come down from time to time who do not truly represent the people they claim to in the field, but if that consultation is done in the field it is done in the presence of the constitutents and that is important.
GARRETT: The PNG LNG project is the biggest investment ever in Papua New Guinea. Just how important is this for future investment that the PNG government get this right?
GRAHAM: I think it is very important. This project is project financed so there is a lot of interest from the lenders from around the world, at what's going on. We've seen already as our project has started to ramp up, the interest in exploration and other developments in Papua New Guinea is clearly ramping up and I think people are just watching to see how does this project progress and can it be done on this scale in this country and if it can I think it is really going to open the door for significant investments.
GARRETT: Considering the problems the government is having meeting its side of the bargain on the PNG LNG Project should land owners deal direct with the project on more issues as they do with land compensation?
GRAHAM: That's a mine field, to be honest. Our job is to build a project and that's our primary objective: to deliver on our commitment to our stakeholders, investors, customers lenders, communities. It's a slippery slope getting involved into the business of government and its an area we do not want to get invovled in. It's not our job to make government policy. It's a place where we won't go. If there is something we can do to facilitate government getting out to do its bit in the field that is the area we are willing to participate. A simple example of that is, that the Department of Petroleum and Energy recently assigned a small num ber of people to the field. We'll help them with accommodation and travel until they get themselves set up in the field. We'll do those enabling things but the last thing we'll doi is get involved in taking decisions on behalf of government or even having the appearance of doing the same.