Economy in Papua New Guinea

About 85% of Papua New Guineans live subsistence agricultural lifestyles in rural villages. Surplus food production is traded in informal cash economies and this makes up the bulk of financial activity in both.

Industries that dominate the formal economic sector are the capital-intensive mining and oil industries that employ large numbers of foreign nationals and relatively few locals. They tend to be controlled by overseas interests and thus considerable portions of the profits are taken offshore. Gold, Copper and crude oil are respectively the second and third highest earning export commodities.

The agricultural sector is more labour-intensive and employs far more PNG nationals than the mining sector. Forestry, copra and palm oil again tend to be controlled by foreign interests. Increases in world coffee prices have provided direct benefits to PNG growers who are mostly smallholders in the Highlands. PNG rubber exports are also significant.

PNG has poor economic infrastructure, which makes the cost of doing business very high. Except for the PNG’s Highlands Highway that connects Madang and Lae to the major population centres in the Highlands, there is not any significant road network. PNG’s mountainous mainland and the many islands in the region means that communities are isolated from each other and the internal transportation systems comprise mostly light aircraft and informal trade-boat routes.  PNG lie off the major shipping routes and thus sea-freight costs are high and services to and from the rest of the world are infrequent. There is almost no manufacturing base in PNG, so just about everything is imported and expensive.

PNG LNG project – An opportunity for PNG

PNG LNG is an integrated development that includes gas production and processing facilities in the Southern Highlands and Western Provinces of Papua New Guinea, including liquefaction and storage facilities (located northwest of Port Moresby on the Gulf of Papua) with capacity of 6.6 million tons per year. There are over 700 kilometers of pipelines connecting the facilities.

The investment for the initial phase of the Project, excluding shipping costs, is estimated at US$15 billion. Over the life of the Project, it is expected that over nine trillion cubic feet of gas will be produced and sold.

The Project will progress in a series of development phases with the first LNG deliveries scheduled to begin in 2014, which will have a great impact on the economy in PNG.

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