horizon has a problem

in PNG New today

Wednesday, 19 February 2014

TWO high-ranking United States officials visited PNG last week. One was a Member of the House of Representatives and the other a Brigadier General from the US Pacific Command based in Hawaii.
Security issues surrounding the PNGLNG Project were top of the agenda, according to reports.

But what is the nature of such security concerns? These days there are fewer reports of security threats posed by local landowners. In fact, having seen the financial windfalls during the construction phase, many are very supportive of the project.
In light of this, perhaps the United States has other security concerns, such as whether PNG can respect agreements with foreign multi-nationals. The United States government through the US EXIM Bank provided $US 3 billion to finance the PNGLNG project.
No doubt following the expropriation of Ok Tedi and the failure by the government to comply with the Nautilus arbitration, there are concerns about the security of investment agreements.
Nautilus has come to realise that some agreements are not worth the ink and paper written on. It has since terminated its agreement with the state and will seek to pursue its offshore mining venture alone.
This however may be easier said than done, as one considers the complex nature of government relations that are needed to get regulatory approvals and support for projects.
This quagmire of government relations has certainly been a major obstacle in the conclusion of the Stanley Gas agreement between the state and developers. Led by Talisman and Horizon Energy, the Stanley gas project located in the Western Province, has experienced delays in regulatory approvals.
Sources close to the negotiations have revealed to Wantok that despite the conclusion of an agreement by the state’s negotiating team, a different draft agreement was passed on by a Secretary of one government Department to the Office of the State Solicitor.
The State Solicitor, having had a colleague being part of the negotiations, was understandably furious when he saw a different draft being dropped on his table.
The negotiating teams will now have to go back to the drawing as they discuss, redefine and churn out a new legal agreement between the state and the developers of the Stanley gas field.
And so the delays will continue on the Stanley side of things, but perhaps it is in the interest of all parties that the negotiations be a little bit more transparent. The more delays there are caused by the competing interests of influential parties, the more whispers there are about strange behaviour patterns.
Reaching an agreement in PNG can be a difficult task. However even when such agreements are reached, they aren’t usually in the best interest of key stakeholders. The rent seeking behaviour of state and local representatives does not benefit both the developer and the people. The consequence of this is usually detrimental to doing business as a disenfranchised populace creates insecurity in project areas.