ExxonMobil’s New Guinea Nightmare
In its contract with the PNG government, and in accordance with the PNG Oil and Gas Act of 1998, ExxonMobil was required to carry out “social mapping and landowner identification” (SMLI) studies, which would have to be approved by the PNG government before petroleum development licenses could be granted. For the LNG project, this task was enormous, affecting 117 villages, including some 3,000 landowners and nearly 34,000 residents. That critical SMLI process would determine who would get land compensation payments up front and, now that gas production has begun, equity interest and royalty payments. From the outset, the project was plagued by disputes over land ownership and appropriate compensation. ExxonMobil claims that its surveys “were compiled by highly regarded Australian anthropologists with extensive experience in PNG cultures, and the reports were reviewed and approved by the Department of Petroleum and Energy.”
From scores of interviews with PNG landowners and tribal chiefs, a different story emerges: the SMLI was rushed and incomplete, and it depended heavily on questionable “paper owners”—many of them residing hundreds of miles from the sites, in the capital city of Port Moresby—who signed over their “rights” without a proper claim to the land. These assertions came from landowners along the pipeline and wellheads, as well as those around the new airport in Komo and the liquefaction plant near Port Moresby.
Many believe the fix was in from the start. In the spring of 2009, more than 2,000 people identified by the PNG government as the affected landowners gathered for a legally mandated development forum and negotiation in Kokopo—the capital of the island province of East New Britain, and hard to get to from Hela Province. This forum would culminate in the signing of an Umbrella Benefits Sharing Agreement (UBSA), a complex contract outlining terms for the disbursement of billions of dollars in royalties and equity payments, as well as funds for infrastructure improvements and seed capital for landowner businesses. The project’s SMLI was far from complete, but ExxonMobil was staring at a December 8 final investment deadline, and this was one of the key remaining criteria that had to be met before the project could move forward.
Transparency International, the global anticorruption watchdog, was invited to serve as an independent observer of the proceedings in Kokopo, but Esso Highlands withdrew the invitation at the last minute, for no clear reason. What the group missed, according to the accounts of landowners, elected officials and attorneys who attended—accounts that are bolstered by court documents—was an exercise in fraud, crudely orchestrated by the PNG government. The forum was punctuated by chaos, with dissenters forcibly removed by security forces.
One of those in attendance was Alfred Kaiabe, the lawyer and former MP. Kaiabe co-wrote the 1998 PNG Oil and Gas Act, which established guidelines for such projects and required benefit-sharing arrangements between the government and landowners. Kaiabe was evicted from the forum when he protested the legality of the affair.
“The over 2,000 people flown to Kokopo were kept on bribery money under the guise of allowance money, to keep them busy and occupied with liquor and women,” Kaiabe wrote in a letter last year to Peter Graham of Esso Highlands. “Their cheaply and fraudulently obtained signatures iced the Kokopo UBSA fraud.”
Kaiabe and others say the PNG government “handpicked” the participants and flew in people of their own choosing from around the country. The ones from his area, not far from Tumbi, “were picked up at 2 o’clock in the morning while everyone slept,” Kaiabe said. He charges that in return for their signatures, they were given seed-capital money, financial commitments from the relevant ministries and sometimes cash on the spot, interactions he claims to have personally witnessed. (“Official bribery,” Kaiabe calls it.) Jubilee Australia, an NGO that has published two extensive reports on the project, described it this way in the summary of its 2012 report: “Improper consultation, and pressure applied by the Government to force the landowners to sign.”
A few months after the Kokopo agreement was signed, local media sources reported, millions of dollars meant for landowner compensation under the agreement vanished from government trust accounts. In 2013, according to Radio New Zealand, Commerce and Industry Minister Richard Maru revealed that $50 million intended for business-development grants to landowners had gone missing as well.
ExxonMobil, for its part, says “landowner identification for the purpose of benefits distribution is the responsibility of the Department of Petroleum and Energy,” and that “neither EMPNG nor the other PNG LNG Project participants are signatories to the agreements; the [Benefit Sharing Agreements] are the responsibility of government.” Even so, it insists that signatories to the UBSA “and the subsequent License Based Benefit Sharing Agreements are recognised leaders and community representatives. These agreements were developed in a highly consultative manner” and “overseen by several eminent PNG citizens.” Apparently, the PNG government doesn’t agree: although it received ExxonMobil’s SMLI report in 2009, last summer William Duma, the country’s then-minister of petroleum and energy, declared that the company’s studies were inadequate.
To this day, the Kokopo agreement remains a festering point of contention in Papua New Guinea. Gas has just started flowing through the project’s 400-mile pipeline, headed for a plant where it will be turned into liquid and shipped to customers in China and Japan. Soon, the big money will start flowing for ExxonMobil and its equity partners, including the PNG government and the officially designated landowners. But the landowners who were left out—and the villagers, like Jokoya Piwago, who lost their loved ones in the landslide and have seen their land and water destroyed by the project—will not be happy. Nor is it a safe bet to expect them to go quietly. “We are highlanders, and we are known for fighting,” said Kaiabe. “Fighting is a way of life, and we will fight to the death to protect what is ours if we have been cheated.”
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