Papua New Guinea says a multi-billion dollar liquefied natural gas project is expected to help propel the country's economic growth rate to a robust eight percent this year. Fueled by rapidly growing demand in Asia for cleaner fuels and global concerns over climate change, the Exxon Mobil-led natural gas partnership with Papua New Guinea is part of a mining boom that is bringing unprecedented wealth to the South Pacific nation.
The liquefied natural gas - or LNG - project that is led by US energy giant Exxon Mobil is the largest investment scheme in Papua New Guinea’s history.
Production is expected to start within four years and has the potential to double the country’s income.
In the capital, Port Moresby, the government faces the challenge of ensuring that this new-found prosperity is handled responsibly and transparently. Ministers have announced plans to set up special accounts known as sovereign wealth funds to save some of the revenue for future generations.
This week Papua New Guinea’s Treasurer, Peter O'Neil, told the national parliament that the boom in the mining and petroleum sectors had attracted large numbers of foreign investors, which is good news for the economy.
“Mr. Speaker the outlook for 2011 is very positive. The economy is expected to grow largely driven by the expected ramping up of the PNG LNG construction activity, and a strong growth in mining and agricultural sector,” he said.
On Friday, Treasury officials said the mining sector is providing the country with an unprecedented opportunity to alleviate poverty. They said money from the project will be reinvested into local communities, including funds for helping tribal landowners start businesses.
Mineral deposits, including gold, oil and copper, account for nearly two-thirds of Papua New Guinea’s export earnings. It is estimated that reserves of natural gas amount to more than 225 billion cubic meters. The industry is fueled by strong demand from Asia, most notably Japan, China and South Korea.
But as companies rush to extract the country’s rich natural resources, Dr. John Burton, from the Australian National University, believes the government there might not be able to cope.
“Is it a free-for-all? Well no, I do not think it is a free-for-all but every industry needs regulators simply to handle things like work permits, make sure the environmental compliances are going alright and that is just going beyond PNG’s capacity at the moment,” he said.
Exploiting natural resources in Papua New Guinea often involves complex negotiations with tribal leaders, along with the logistical challenges of building pipelines and roads over rugged and remote terrain.
Papua New Guinea has a population of about 6 million people. The country occupies the eastern half of the island of New Guinea.
As its mostly agrarian economy prepares for major upheaval due to a booming mining sector, analysts have warned that other social problems could derail progress. Papua New Guinea has the second highest infection rate of HIV and AIDS in East Asia and the South Pacific, while the nation is also beset by serious law and order issues.