Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

asked the Minister representing the Minister for Trade, upon notice, on 13 December 2010:

With reference to the Export Finance Insurance and Insurance Corporation (EFIC), AusAID and the liquefied natural gas project in Papua New Guinea (PNG LNG):

(1) What is AusAID's role in the PNG LNG project.

(2) Does AusAID have a monitoring and advisory role; if so, how many reports has AusAID provided on PNG LNG and what was the nature of those reports.

(3) Given that in the past 6 months there has been more conflict in PNG in relation to this project, with the most recently reported attacks involving high-powered weapons occurring on Friday, 24 September 2010 at the site of an Australian contractor:

(a) can the Minister comment on reports in the PNG daily newspaper, The National, as well as local civil society groups, advising that the violence is a result of uprising of leaders from landowner groups within the project area who believe they have been excluded from the benefit sharing agreements; and

(b) is the Minister aware that in July 2010 a dispute between warring factions from Moran, a lucrative site in the Southern Highlands province where part of the PNG LNG project is located, erupted in a gun battle at PNG's main domestic airport, with the gunmen and a number of bystanders wounded.

(4) Can details be provided on the level of violence and security issues relating to this project over the past 12 months.

(5) Is any review process currently being employed by EFIC (or the Australian Government) to consider the escalation in security threats and project associated violence; if so, can details of the review be provided.

(6) Given that on 12 November 2009 The National reported that Australia is assisting the PNG Government with the establishment and administration of the PNG LNG sovereign wealth fund and that AusAID's chief economist would assist with economic modelling for the fund and provide guidelines for ideal use of government revenues: Can details be provided outlining:

(a) the guidelines for ideal use of the revenue entering the sovereign wealth fund; and

(b) the precise assistance or involvement the Australian Government has in the establishment of the sovereign wealth fund for PNG LNG revenues.

(7) Given that a security assessment for the LNG PNG project was completed by Control Risk Australia Pacific, which concluded that security risks will be manageable if their recommendations are implemented, can an outline of the recommendations be provided together with advice as to whether these recommendations have been implemented to date.

(8) In a recent ANZ report, the bank's Chief Economist for Asia stated that the revenue boom from the PNG LNG project is a significant opportunity, but he warned that it will only lift the living standards for people of PNG if it is prudently managed, citing Botswana and Chile as examples of prudent management of resource revenues, while citing Nigeria as the opposite: Given this analysis:

(a) what evidence does EFIC and the Minister have that PNG has institutions in place to 'prudently manage' the revenue generated from the PNG LNG project; and

(b) is the Minister concerned that PNG, like Nigeria, has seeds of conflict already showing.

(9) Can an outline be provided of what the Australian Government will do if conflict in PNG escalates further.

(10) Noting the warning in the ANZ and D'Appolonia reports which cite that 'fair and transparent distribution of project benefits to PNG stakeholders is a critical path-item', why did EFIC or the Australian Government not make the EFIC project finance conditional on the adoption by the PNG Government of the Extractive Industries Transparency Initiative (EITI).

(11) In relation to the relocation of 416 households during Phase 1 of the LNG PNG project, have:

(a) project sponsors complied with IFC Performance Standards; and

(b) resettlement action plans been disclosed to all communities.

(12) Given that under section 8F of the International Monetary Agreements Act 1947 (the Act), the Joint Standing Committee on Foreign Affairs, Defence and Trade is required to report on international loans made under that Act and that in 2001, the Australian Government produced a National Interest Statement to be considered by the committee for an Australian Government loan of AU$133.2 million to PNG:

(a) why is an Australian export finance loan to ExxonMobil and other PNG LNG project proponents, valued at more than $500 million dollars, not subject to a National Interest Statement and review by the committee; and

(b) why was the Act in this instance not applicable.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

The Minister for Trade and the Minister for Foreign Affairs have provided the following answer to the honourable senator's question:

The following answers have been provided by the Minister for Foreign Affairs:

(1) AusAID was consulted by the Department of Foreign Affairs and Trade (DFAT) in the drafting of the Joint Understanding between Papua New Guinea and Australia on further cooperation on the PNG LNG Project (the Joint Understanding).

As part of implementing the Joint Understanding, AusAID is providing funding for the Department of Finance and Deregulation (Finance) to advise the PNG Government in developing sovereign wealth funds for the management of revenue from the PNG LNG Project. AusAID has also agreed to assist PNG with economic modelling to identify potential impacts of the LNG project. This work is ongoing.

In addition to the Joint Understanding, AusAID has participated in DFAT-led bilateral consultations requested by PNG to identify short term capacity gaps in PNG departments and agencies as a consequence of additional demands generated by the construction phase of the LNG project. No final decisions have been taken on what, if any, assistance will be provided.

(2) No.

(3) (a) Benefit Sharing Agreement arrangements are a matter for the PNG Government, landholder associations and the Project Partners. There have been reports that confusion and dissatisfaction regarding access to revenues, government grants, employment and business opportunities have given rise to a number of protests and violent incidents. It is not always clear the extent to which these activities are directly linked to the PNG LNG Project or are rather a reflection of long-standing and complex conflicts.

(b) I am aware of the shooting incident involving landowner groups from the Southern Highlands at Port Moresby's domestic airport in July 2010. It is not clear whether this incident was primarily linked to the PNG LNG Project or whether there were other issues involved.

(4) The Project's Quarterly reports, published on the PNG LNG website (http://www.pnglng.com/quarterly_reports/), note project-related security incidents. Project managers have reported some improvements in security on the ground over the past six months.

The following answer has been provided by the Minister for Trade:

(5)    EFIC and other lenders to the PNG LNG Project required the borrower to engage an independent environmental and social consultant (IESC). While the IESC, D'Appolonia S.p.A (D'Appolonia) is paid by the borrower, it is solely responsible to the lenders including EFIC. D'Appolonia is required to regularly report to the lenders on a range of issues including community security. The results of D'Appolonia's first report, including an analysis of community security, can be found at:

http://www.pnglng.com/quarterly_reports/e_s_reports.htm.

D'Appolonia has been appointed on behalf of the lenders to monitor the Projects performance against environmental and social benchmarks. This includes following up any areas of non-conformance (as that term is used in the D'Appolonia report) and reporting publicly on the outcomes. In the event that an issue of non-conformance is not satisfactorily resolved by the Project this may constitute a breach of loan conditions and result in the requirement to repay the loan.

The following answers have been provided by the Minister for Foreign Affairs:

(6) (a) The guidelines for the use of revenue entering the sovereign wealth funds is a matter for the PNG Government to consider. As part of the Australian Government's assistance under the Joint Understanding, the Department of Finance will be providing advice to the PNG Government to consider as they develop these guidelines.

The guidelines for the use of the revenue entering the Sovereign Wealth Funds (SWFs) may also be informed by the economic modelling. The specific objectives of the economic modelling will be formally agreed with the PNG Government in 2011. The broad areas of focus will include (1) assessing the capacity of the PNG economy to efficiently absorb LNG funds, and (2) assessing the broader macroeconomic impacts of the LNG project

(b) Australia is providing technical and advisory support on the development of SWFs, particularly using our experience with the Future Fund. The Chairman of Australia's Future Fund Board of Guardians, Mr David Murray, AO, travelled to PNG from 29 November to 1 December 2010 as part of his engagement by Finance to provide advice on the establishment of SWFs.

The Department of Finance, where asked by the PNG Government, will continue to work with the PNG Government to develop and implement SWFs. As stated in the Joint Understanding, Australia is emphasising the need for consistency with the Santiago Principles.

(7) The Project's security arrangements are a matter for the PNG Government and the Project Partners. The PNG LNG Quarterly Social and Environmental Report provides information regarding management of security at project work areas.

See from page 11 at http://www.pnglng.com/quarterly_reports/e_s_reports.htm.

(8) (a) It is not appropriate to comment on the institutional strength of specific PNG Government bodies. The PNG Government has committed to establish the SWFs in accordance with the Santiago Principles. When requested, the Australian Government will provide advice and assistance to the PNG Government to manage the revenues of the LNG project in accordance with the Santiago Principles.

(b) The PNG Government faces significant ongoing challenges in achieving and maintaining law and order. Australia has been a long term partner in assisting the PNG Government's law and justice sector address these challenges.

(9) Law and order within PNG is a sovereign matter for the Government of PNG and it will ultimately decide how to manage its internal security issues. Future Australian assistance to this sector will be jointly agreed between the Australian and PNG Governments in the context of the overall priorities of the aid program.

(10) The adoption of the Extractive Industries Transparency Initiative (EITI) is a sovereign matter for the Government of PNG to consider. As noted in the Joint Understanding, however, Australia is supportive of PNG implementing the EITI.

The following answers have been provided by the Minister for Trade:

(11) (a) and (b) The independent consultant, D'Appolonia undertakes site visits to monitor the project's compliance with the Lender's environmental and social standards (principally the IFC Performance Standards) which includes reporting on the Project's resettlement activity. All resettlement is subject to the free, prior and informed participation of affected people and communities. D'Appolonia reports on the Project's compliance with these requirements.See the reports on the PNG LNG website:

http://www.pnglng.com/quarterly_reports/e_s_reports.htm.

Section 2 of the D'Appolonia report includes an Issues Table which summarises non-conformances (as that term is used in the D'Appolonia report) while sections 5, 6 and 7 provide a detailed analysis of the Project's social performance including resettlement.

(12) (a)    A National Interest Statement is required only where Australia has provided financial assistance under the International Monetary Agreements Act 1947 (Cth) (the Act), to a recipient country under an International Monetary Fund (IMF) program for the benefit of that country or a World Bank or Asian Development Bank program for the benefit of that country. Australia did not provide financial assistance under the Act for the reasons outlined in paragraph (b) below.

(b) The Act was not applicable because it only covers funding by the Commonwealth of Australia to a recipient country in support of IMF, World Bank or Asian Development Bank programs. The PNG LNG funding was made available to a corporation (Papua New Guinea Liquefied Natural Gas Global Company LDC) and not to a recipient country as specified in the Act.