Letters from Port Moresby

A scene in one of Port Moresby’s supermarkets during the holiday season. - Photo courtesy of ANCILLA WRAKUALE

Cash windfall from LNG, oil, gold-copper and nickel

By ALFREDO P HERNANDEZ

JPHS Batch '65

Port Moresby

THE fluid inflows of US$14 billion LNG investment money into the local economy have made many Papua New Guineans awash in cash.

I am not talking about the everyday professionals, workers, executives or entrepreneurs, who are anyway assured of pocket monies every day or every fortnight.

I’m referring to the villagers in areas where projects like LNG, oil, gold-copper-and-nickel dwell; people who own the land hosting such projects; people who usually decide whether or not such projects could proceed.

And most of the time the deciding factor is money – without kina -- the local currency -- crossing the negotiation table, no project could exist.

Gold explorers at work in the Highlands.

Multinationals like ExxonMobil, InterOil, Oil Search, Ramu NiCo (of China) and others would not be able to pursue their billion-dollar enterprises unless they come across. They have to bleed – and bleed plenty -- if they want to see their investment come into fruition.

And for them, time is of the essence. LNG projects have to start production as soon as possible before they could lose their Asian markets to Australian LNG rivals.

So project owners have no recourse but to pay up.

The latest money saga involves hundreds of villagers, or shall we say landowners, whose traditional land was bisected or to be bisected, by the 400km plus long oil pipeline network that originates from the highlands where liquefied natural gas (LNG) deposits will be pumped.

Not to mention those villager/landowners whose land hosts the LNG or oil deposits and facilities such as oil rigs and pumping stations needed to extract such wealth from the bowels of the earth.

This massive pipeline network will be siphoning down the gas to a multi-million dollar processing plant just outside Port Moresby. This will go on in the next 20 to 30 years, starting from 2014.

And the villages that host every pipe segment have already received, or about to receive, their moolah from the project owners under terms and conditions agreed by both parties with close mediation and scrutiny by government representatives.

The amount, which is usually called “grease money, “facilitation money” or “goodwill money”, is one of three usual sources of their financial windfall.

The other two are the royalty from the project, which is determined by the government of Papua New Guinea on behalf of the locals, and the so-called “compo” – compensation -- should the locals decide that the project is destroying or harming their environment.

Normally, they would stop the project from proceeding if it is in development phase, or if it is in actual operation, would take over it and shut it down – till the owners bleed again with millions.

Until 10 years ago, royalty money came down to the villagers through their representatives who served as the go-between for the locals and the project owners.

Heavy equipment at work on the PNG LNG project worth over US$15 billion.

The scheme made the middlemen rich instead of the locals. It was simple: the middlemen were usually the educated ones, who effortlessly gypped the unschooled and ignorant villagers into accepting crumbs.

Learning from their said experience, the villagers are now wiser and the government as well.

All financial benefits from royalties will go to the development of the resource host in terms of road, schools, water facilities, health facilities, livelihood projects and more.

This is to make sure the money from the resource wealth would benefit the community.

Before any development project could proceed, a sharing agreement would have to be put in place – refereed by the government – to make sure the companies will deliver and the villagers-landowners will receive.

That’s the royalty money.

The other monies are the “facilitation money” and the “compo”. And this is the thing because it goes straight to the villagers’ pockets.

Over the last two years, a flood of such money running in millions has made many villagers one-day millionaires or overnight rich.

And the city of Port Moresby is not complaining. Retail business has flourished, fueled by spending from such financial windfall.

Until about 15 years ago, only the expatriates in the city would be seen most of the time in supermarkets. The locals, with not much money in their pockets, were relegated to small tucker shops (similar to our “tindahan sa kanto”) for their household needs.

And the amount of foodstuff they bought was not that much – a kilo of cheap rice or a few pieces of biscuits, two or three pieces of canned tuna, sugar, tea and cooking oil.

That’s all they could take home because that’s the only thing their money could buy.

The picture now has drastically changed, or shall we say, has been turned upside down.

These days, many locals now travel down in their 4x4s, CRVs or tall pickups from LNG-involved villages and would jam supermarkets and shops, heaping their trolleys with goodies till they overflowed.

Indeed good for the economy. Good for business. Retailers made sure their shelves are stocked up. No problem. Stuff would be bought in no time at all. This is Port Moresby in the heyday of the gas miracle.

LNG money-fuelled locals not only packed the supermarkets but also shops selling electronics, from TV to cell phones, and garment shops – especially those in Port Moresby’s latest shopping mall – the Malaysian-owned Vision City Megamall.

And because of them, retail stores no longer think twice in jacking up prices, thus contributing much to the high cost of living in the city, to the great dismay of expatriates, including Filipinos, whose pay in US dollars is now being wiped out in value by the unbelievably strong kina currency. (In the next few months, the value of the US dollar vs kina would be one-half. Five years ago, the kina was worth US$0.3000. Now, the local currency has gone up to US$0.4600.)

Anyway, according to a Filipino entrepreneur – a friend of mine, in fact – who sells movie DVDs and similar items: “They (locals) don’t bother about prices, they are not intimidated by the price … if they like an item, they grab it.”

About four years ago when cell phones were first introduced in Papua New Guinea, I was at a shop browsing different China-cloned handsets alongside those real thing from Nokia, Motorola, Samsung, GL, Sony-Ericsson, to name a few.

Promo cell phones were really cheap, and I considered buying that China brand.

While trying to decide between two cheap handsets (the price was just K50 [kina], then considered very cheap), a woman entered the air-conditioned shop.

Shabbily dressed, her kinky-brownish hair exploding, she carried a “bilum” (string-woven bag) alongside a sort of undistinguishable BO.

Standing next to me, she pointed to a folding thin handset by Motorola – the latest Razr model costing K1,500 (1k= Php14) displayed inside the glass case,

The sales staff handed it to the woman. Scrutinizing it for a while, she declared: “OK, I want this.” And she paid from a stack of K50 notes she fished from her bilum

I was a bit impressed, or shall we say stunned, for here I was, an expatriate struggling to decided whether or not to buy a cheap cell phone, and there she was - a shabby local girl who just snatched up one expensive handset as if it was a piece of candy and paid for it without second thoughts.

Intrigued, I followed her outside the shop, watching her walked across the parking lot – towards a vehicle parked next to mine, which is an old 323 Mazda station wagon.

Then she took off -- in a brand-new dirt-splattered Toyota 4x4 twin cab whose tires were heavy with brownish-yellowish mud.

She’s on the way to her village home outside Port Moresby, where the 400km plus long LNG pipeline will make its way through late this year.