ExxonMobil LNG project blighted by corruption and security concerns

Project documentation for the recently announced $15 billion ExxonMobil liqified natural gas (LNG) project in Papua New Guinea reveals many corruption and security concerns. If these are not addressed there is a very real chance the project will only intensify PNG’s governance crisis and lead to more civil unrest.

Concerns include the lack of transparency about the size of government revenues from the project and where they will end up; the use of tax havens by companies involved in the project; the involvement of firms already implicated is massive fraud and corruption scandals; a failure to follow international protocols to investigate political interests in the project; the lack of transparency and fairness in agreements with indigenous landowners; and a failure to plan for the massive social impacts of imported labour, especially in relation to HIV/Aids.

The international Extractive Industries Transparency Initiative was established in 2002 and requires companies to publish the revenues they pay to governments and governments to publish the revenues they receive. Such disclosure allows the public to see how much money is being generated and if it is being directed towards uses other than those for which it is intended and to help direct revenues to public interest needs. ExxonMobil claims to be a supporter of EITA, as is the United States government, yet none of the EITI requirements have been included in the project documentation for the PNG project which suggests there is an intention to avoid any transparency or public disclosure. In a country like PNG which is already blighted by government corruption and the mysterious disapperance of billions of dollars of government cash every year, this lack of transparency will only intensify public concerns.

There has also been a complete lack of transparency about the benefit sharing agreements with local indigenous landowners. Transparency International has spoken of its “grave concerns” after the groups invitation to serve as an independent observer in the funding negotiations was abruptly withdrawn. At this stage there is no information to suggest the promised revenues for indigenous groups will be adequate or that they will not be diverted into the pockets of politicians and other leaders.

ExxonMobil has recently awarded contracts for the front end engineering and design work for the PNG LNG project to a joint venture company jointly owned by Kellogg, Brown and Root (KBR) from the USA. A former CEO of KBR has recently pleaded guilty to involvement in paying $182 million in bribes to secure contracts for a Nigerian LNG project. In February last year KBR itself pleaded guilty to being involved in corruption and agreed (along with Halliburton) to pay $579 million in penalties. ExxonMobil’s decision to involve KBR in the PNG LNG project sends a clear signal that not only will it tolerate corruption it will reward those involved.

The PNG LNG project involves many individuals who meet the criteria of ‘Politically Exposed Persons’ as a result of their position in government or the executive or family connections. Many countries have laws that require PEPs to be identified and for financial institutions to perform due diligence on any transactions with which they could be involved. ExxonMobil has not chosen to identify the PEPs involved in the PNG LNG project which raises further concerns.

Further, the PNG LNG company is registered in the Bahamas – one of the world’s most notorious tax havens. There has been no legitimate explanation given for why this location has been chosen or whose interests this will serve. This only increases the legitimate criticism and suspicion surrounding the project.

There is also serious concern about the social impacts of the huge LNG project and the failure of ExxonMobil to properly recognize these in the project documentation or plan for their management. These social impacts are bound to lead to further tensions across PNG – a country that is already very familiar with tribal fighting, violence against women and where other major resource projects have provoked violent demonstrations and, indeed, a civil war.

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