Australian-Backed Project Could Spark 'New Civil War' In PNG

There are risks landowner discontent could "spiral out of control".

What you need to know
  • Part Australian-funded project has the hallmarks of another Bougainville civil war
  • The Australian Government gave half-a-billion dollars to the project in 2009
  • Lack of payment to landowners could spark a military crackdown

A partly Australian-funded liquefied natural gas project in Papua New Guinea's southern highlands has the hallmarks of another Bougainville civil war, a new report warns.

The ExxonMobil-led project, which attracted a half billion dollar Australian government loan in 2009, supplies eight million tonnes of gas a year to Japan, South Korea and China.

Despite gas flowing since 2014, landowners in Hela province are yet to receive royalty payments, resulting in escalating tensions, tribal violence, incidents of hostage-taking, blockades and sabotage.

ExxonMobil is leading the project. Image: Getty Images

A new report from Australian thinktank Jubilee Australia warns there are risks landowner discontent could "spiral out of control" and might force the PNG government into a military crackdown.

"The build-up of arms has accelerated to a pointed where it is often speculated that the landowners are in possession of more firepower than the entire PNG defence force," the report says.

Between 1987-1997, 20,000 people died in a civil war between PNG and its Bougainville province. Panguna, one of the world's largest copper and gold mines, sparked the conflict.

"The PNG state lost its war with Bougainville against a population that began the war armed only with bows and arrows," the report says.

"In Hela, the population is far more numerous and heavily armed with weaponry that is increasing in sophistication and firepower by the day."

The report is scathing of undelivered infrastructure projects resource companies promised landowners including roads, airports, hospitals, housing and sewerage projects.

PNG PM Peter O'Neill dismissed the report as fake news. Image: Getty Images.

Report author Michael Main, who spent seven months on the ground in Hela province, said the vast majority had not been built. A few were incomplete or not maintained properly or were white elephants.

He pointed to the Komo hospital, which has no equipment, staff, fuel for its generator, or beds.

"Tari airport does not even have a security fence, and on one occasion the author was required to chase away a cow that had wandered on to the airstrip, away from the Air Niugini plane that was coming in to land," the report said.

The gas project was partially funded by Australia after the export credit agency Efic made its largest-ever loan of $500 million to ExxonMobil, OilSearch, Santos and the PNG government in 2009.

The report is critical of the due diligence undertaken by consultants paid for by ExxonMobil.

It calls for a full Senate inquiry.

Last month, Jubilee Australia released another report which concluded the touted economic boom from the project had not eventuated and the PNG people would have been better off if it hadn't gone ahead.

PNG Prime Minister Peter O'Neill dismissed the report as fake news, despite admitting he hadn't read it, while some of his ministers acknowledged the government had some lessons to learn.

Comment has been sought from ExxonMobil and the PNG government.

Reporting by Lisa Martin AAP