Papua LNG is a project aimed at developing the Elk and Antelope gas fields in the Gulf Province of southeastern Papua New Guinea and constructing liquefied natural gas (LNG) production facilities near Port Moresby. At the time of this study, the project is in the stage of seeking lenders, and the final investment decision (FID) is expected in 2025. The project’s ownership structure includes TotalEnergies SE with a 37.55% share, ExxonMobil with 37.04%, Santos with 22.83%, and JX Nippon Oil & Gas Exploration Corporation, a major subsidiary of ENEOS Holdings, Inc., with 2.58%.
This study examined whether the Papua LNG project aligns with international standards for environmental and social considerations. The study revealed non-compliance with 6 ESG standards, in detail the Paris Agreement, the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), the Equator Principles (EPs), the International Finance Corporation’s Performance Standards (IFC PS), the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (OECD Guidelines), and the Japan Bank for International Cooperation’s Guidelines for Confirmation of Environmental and Social Considerations (JBIC Guidelines).
The summary of these findings is as follows:
Issue 1: Papua LNG runs against Paris 1.5 degree goals.
The International Energy Agency (IEA), in its 2023 report, titled “Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach”, reiterated its conclusion from its 2021 report that in order to achieve net-zero greenhouse gas emissions by 2050, no new coal, oil or natural gas projects are needed. Therefore, the currently planned Papua LNG project is not aligned with the 1.5-degree goals of the Paris Agreement.
The G7 Elmau Communique, which the Japanese government committed to in 2022, stated to “commit to end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited circumstances clearly defined by each country consistent with a 1.5°C warming limit and the goals of the Paris Agreement”, and since then, this commitment has been carried forward in each annual G7 declaration.Therefore, in applying the exception clause to the project, the energy policy of the recipient country, Papua New Guinea, and major gas consumer countries including Japan needs to be consistent with the 1.5-degree goals of the Paris Agreement.
To achieve net-zero emissions for the gas extraction project, it is necessary for the forestry sector in the country to reach a net gain state. However, no specific targets or policies have been presented to achieve this net gain. In reality, the loss and degradation of forests in the country have increased by approximately 1.87 million hectares between 2001 and 2023, which is insufficient as a carbon sink to offset emissions from fossil fuel extraction. Although the Papua New Guinea government has set a goal of carbon neutrality by 2050, specific measures aligned with the 1.5-degree target have not been clearly defined. Papua LNG is intended for export, not for domestic use. Up to 95% of the fossil gas produced will be exported. PNG itself has excellent renewable energy prospects. The energy policy of Japan, a major consumer of gas from Papua LNG, is also not aligned with the 1.5-degree goal of the Paris Agreement. If Japan’s public financial institutions, such as the Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI), and Japan Oil, Gas and Metals National Corporation (JOGMEC), support this project, it would be in violation of the G7 Declarations.
Issue 2: The “Free, Prior, and Informed Consent (FPIC)” of affected Indigenous Peoples has not been secured, violating UNDRIP, EPs, IFC PS, OECD Guidelines, and JBIC Guidelines.
Indigenous Peoples affected by Papua LNG have expressed concerns that the project is proceeding without their consent, and a protest was held in 2023 to block the waterways used by the project. Local authorities, members of Parliament, and Indigenous Peoples also pointed out omissions in the list of landowners released by the government. Fundamental to the ‘consent’ aspects of FPIC is an ability to show that communities have been fully informed of their FPIC rights and received accurate, independent information about the project’s climate, environmental, health and human rights risks before any decisions are made. The project has not shown this. There are also issues such as police presence at consultation meetings with Indigenous Peoples. Clearly, FPIC of affected Indigenous Peoples has not been secured.
Issue 3. Offsetting measures for impacts on biodiversity are insufficient, violating IFC PS and JBIC Guidelines.
The project area includes 48 new-to-formal science species and 15 species undescribed by formal science. This raises questions about the extent of biodiversity risks and impacts, and the ecosystem services that these species provide, that have not been satisfactorily addressed. The operator states that the project will clear 820 hectares of forest (including 662 hectares of primary forest), which is expected to impact biodiversity. To mitigate the impact on biodiversity, the operator intends to offset deforestation by planting 1,000 hectares of forest with zero net deforestation. However, it is unclear whether afforestation with secondary forests, which have a degraded value compared to primary forests, can restore the original biodiversity and hydrological service values, and zero net deforestation does not fully compensate for deforested forests. Thus, the operator’s biodiversity offset measures are inadequate.
Global banks committing non-financial support and Japanese financial institutions with the potential to provide financing
Non-government organizations (NGOs) from around the world have been conducting global-scale advocacy targeting financial institutions, urging them not to support the Papua LNG project. As a result, to date, the following ten financial institutions have directly stated that they will not support the Papua LNG project or have adopted policies that exclude support for such projects.
10 financial institutions which have ruled out project finance for Papua LNG
However, Japanese financial institutions have not committed their non-financial support for the project, leaving the possibility of support. Japanese financial institutions that are expected to support the Papua LNG project based on their past LNG projects in Papua New Guinea and their involvement in LNG projects in Australia, a neighboring region, are JBIC, MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking Corporation, Resona Bank, Shinkin Central Bank, SBI Shinsei Bank, Chiba Bank, NEXI, Tokio Marine, MS&AD, SOMPO. In order to protect the environment and uphold rights of communities, especially Indigenous Peoples, Japanese financial institutions should also announce that they will not support Papua LNG.
To read the full report, click here.