Thursday, January 27, 2011

Esso: Wealth from gas plan

But economic windfall comes with a host of problems like STD, social conflicts


The PNG LNG project will bring a windfall of economic benefits to the economy alongside a host of social problems like sexually transmitted diseases and social conflicts between the locals and outside job seekers, The National reports.

This was gleaned from the latest report covering the first three quarters of last year issued by Esso Highlands Ltd, operator of the project and subsidiary of ExxonMobil Corp.

However, EHL is certain the economic benefits would outweigh the feared social problems that the gas economy would spawn.

In its report, EHL said has repeated an already known fact that the gas project is scheduled to deliver starting 2014.

EHL said during this time, the country’s gross domestic product is forecast to double an average of K18.2 billion as a long-term benefit.

The reports said as the GDP doubles, the opportunity exists for the national and provincial governments to use it to address associated impacts that will most likely result such as a demand for improved health and education systems, infrastructure, and the provision of appropriate judicial and law enforcement systems.

However, the report has warned that although there would be significant economic benefits, there would also be social issues that could arise that would need to be managed.

For instance, it cited problems like sexually transmitted diseases, migrations to work and illegal settlements and the potential social conflict between local populations and employment seekers.

The report said a key component of the project is an effective, ongoing communications programme involving the operator, national and provincial governments, local communities, landowners, NGOs and other interested stakeholders.

The aim is to ensure there is an understanding of the project, its implications and how issues will be addressed.

The report said the economic impacts of an LNG development in PNG would reach well beyond the direct investment in country and the tax and equity returns to the state.

During the project life, tax revenue is expected to total around K67 billion, with royalty payments estimated to total K5.3 billion.

This is split as follows: local landowners - 50%; provincial government-33%; local government -10% and the State - 7%.

EHL said the project’s direct benefits could be derived from:

* Revenue, which from a case study assumption, direct cash to the PNG government and landowners is estimated to be over US$32 billion in the 30-year project life;

* Employment, which once operational, should have approximately 1, 250 full time positions to be filled by nationals; and

* Business opportunities for landowner companies who can supply various support services such as camp maintenance, local personnel transportation, vehicle hire, catering and minor civil works.

The true potential of the project lies in its ability to influence economic performance indirectly such as:

* The spending by project participants, employees, landowners and others;

* The investment in assets for infrastructure, education and health; opportunities for local businesses;

* Indirect macroeconomic impacts on GDP, consumption, employment and doubling of foreign currency exchanges; and

* All of these contributing to the upward pressure on the kina.




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