UPDATE 1-Exxon to restart work at PNG LNG

Thu Mar 29, 2012 1:13pm GMT
 

* PNG troops to "restore law and order" at LNG sites -media

* Exxon's LNG work at Hides are resume after landowner agreement

* Landowners demanding additional compensation

PERTH, March 29 (Reuters) - Exxon Mobil is set to restart work at its $15.7 billion gas export project in Papua New Guinea after the government resolved a dispute with landowners who had been blockading Exxon sites in the Hides area, the company said on Thursday.

The landowner protests against the project prompted the Papua New Guinea government to approve the deployment of troops to the country's Southern Highlands province to "restore law and order", according to local media.

Work at Exxon sites in the Hides area has been at a standstill for about two weeks as landowners demanded additional compensation for the use of their land, including infrastrure such as schools and roads that were not part of an original compensation agreement.

"Community leaders in the Hides area have come to a resolution with the Government to allow work in Hides to resume. We have begun to mobilise our workforce to recommence work," Exxon spokeswoman Rebecca Arnold said.

Prime Minister Peter O'Neill had originally planned to call a state of emergency in the Southern Highlands province, but decided not to go ahead once landowners agreed to move the blockade.

Troops will still be deployed to the region, according to sources familiar with the situation, to reinforce the local police force in the area, where tensions between PNG LNG and landowners have been common since the project began.

The Prime Minister's office did not immediately respond to a request for comment and other government offices, including those of the defence force, could not be reached.

Exxon's Papua New Guinea liquefied natural gas plant, known as PNG LNG, is the country's biggest-ever resource undertaking and is expected to boost GDP by 20 percent. The gas export project spans a large portion of the island nation and will pipe gas hundreds of kilometres to an LNG export plant near the capital in Port Moresby.

PNG LNG is still on schedule to come online in 2014, despite the work stoppage but operations have continued normally at the rest of the project's work sites, Exxon said.

UNMET EXPECTATIONS

Some industry experts said they feared the deployment of troops could exacerbate the conflict with landowners, a development that is not unusual in the Southern Highlands, a province in the centre of the country where the population is well-armed and disputes are often settled violently.

The move is "ill-advised," and complaints about compensation are unlikely to be resolved by force, said one industry insider, who did not want to be identified.

But others said the presence of troops could quiet the area, which has little government presence and an overstretched and under-equipped police force.

"It's likely to calm the situation so long as, at the same time, the government and companies are talking with the landowners and addressing their issues," said Paul Barker, executive director of the Papua New Guinea Institute of National Affairs, a privately-funded non-profit research institute.

The distribution of windfalls from PNG LNG has been a bone of contention since the project's inception and early work was delayed in 2009 due to landowner concerns about compensation.

Papua New Guinea has abundant mineral wealth, but the majority of its citizens live subsistence lives.

"The expectations have been raised fairly astronomically by having a major resource project on their doorstep, but in many cases (people have) not felt benefits or the benefits are going to other people," the Institute of National Affairs' Barker said.

Part of the problem lies with the government, which has, in some cases, overreached in its compensation agreements with landowners and has not addressed landowner concerns promptly.

"The government participates in these benefit-sharing agreements and unfortunately, they've tended to promise a lot and they have been a bit slow in delivering, partly because you haven't got the production yet, so the government doesn't actually have the revenue," Barker said.

The LNG project is a joint venture between Exxon Mobil, Oil Search, Santos, Japan's JX Nippon Oil and Gas Exploration, a unit of JX Holdings, and the Papua New Guinea government.

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