PNG’s extractive sector is set to expand, with the construction of the next mega-project – the Papua LNG project – about to start this year. In light of this, a new discussion paper analyses the employment and skills development impacts of the Liquefied Natural Gas (LNG) project in PNG. Lessons from the US $19 billion PNG LNG investment, the largest resource project ever completed in the country, can inform workforce development for future projects.
The construction of the PNG LNG project began in 2010 and the first gas shipment was made in May 2014. The project construction phase saw unprecedented growth in formal employment. Data provided by ExxonMobil suggest that at its peak, the project employed an estimated 21,220 workers, of which less than 8,500 were Papua New Guineans. When the project construction phase ended in 2014, the number of jobs on the PNG LNG project fell to about 2,000, with some 1,500 jobs for Papua New Guineans (see Figure 1).
Figure 1: PNG LNG workforce 2010-2014
The majority of skilled nationals who worked on the PNG LNG project were likely poached from other companies. However, no figures are available to show how many of the skilled workers who resigned from previous positions to work on the project were replaced by Papua New Guineans, thereby creating local employment opportunities. It is therefore impossible to determine the number of additional skilled nationals who may have gained employment in the PNG LNG project.
In contrast, low-skilled labour is readily available, and low-skilled Papua New Guineans from project areas were recruited as preferred area employees. During the construction phase, they made up the majority of the local workforce, but received little training, and their time on the project was short. As construction of roads, pipelines and other infrastructure moved on, workers living near the new areas were recruited instead, so few workers had the opportunity to make a permanent transition into the formal workforce.
Although no data is available, the recruitment of preferred area employees has increased the proportion of project workers from mining areas and host provinces. Oxfam’s study in four villages closest to the Central Province LNG plant revealed increased incomes, but many villagers also expressed concerns about the large number of foreign workers.
The lack of technical and vocational skills and experience of working on large, complex, projects resulted in many positions being filled by foreign workers. The Department of Labour and Industrial Relations (DLIR) facilitated the employment of foreigners on the PNG LNG project in several ways. It established an “LNG Priority Line” which guaranteed a quick turnaround time of ten days for processing work permit applications, instead of the usual 42 days. Some of the work permit requirements were also lifted, and the Employment of Non-Citizens (Amendment) Act 2008 exempted ExxonMobil from advertising in PNG to find suitable citizens before offering positions to non-citizens.
Most foreigners worked as managers, engineers, technicians, and qualified tradespeople. The shortage of welders was particularly acute – according to DLIR, PNG had less than 600 licensed welders, but more than 5,000 were needed when construction began, so large number of specialist welders were imported, mostly from the Philippines. The Project Agreement between ExxonMobil and the PNG government is not publicly available, but is widely assumed to contain only vague and general commitments regarding training and localisation of workforce. Close to 100 local welders were trained during the LNG project but it is not clear where they now work, and the number of welders registered in PNG is still at under 600.
The number of LNG Project jobs has fallen substantially since the end of construction (see Figure 1). And skill shortages have become less severe. While there are enough welders, electricians and fitters to operate the LNG project, there is a shortage of process technicians (or plant room operators) who can operate the LNG plant.
The overall impact of the project on employment is difficult to determine because the LNG workforce was not monitored. A manager of one recruitment agency told us “there are now many workers with the experience of working on a large, world-class project. They were [however] used to huge salaries which created expectations that cannot be fulfilled outside of the LNG project… Some are currently registered in databases and are waiting for the next big project to set off”. However, there is no centralised database and it is unknown how many former LNG workers are still on the project, unemployed, or employed elsewhere. As such, it will be difficult to track down individuals with the skills or experience to be employed on future projects.
The PNG LNG project brought some employment benefits to PNG, but these could have been considerably larger if there was more emphasis on training and local employment. Earlier investment in training would have benefitted more Papua New Guineans, giving them skilled employment opportunities on the project. Moreover, the PNG LNG construction phase did not last long enough to build up specialised technical skills, while the exposure of low-skilled local workers was ad hoc and intermittent. PNG nationals who worked on the LNG project were not skilled or re-skilled to give them other employment options when their contracts ended.
For employment on mega-projects to be sustainable, companies should ensure that national workers are able to find alternative employment after the project construction phase. At the very least, they should acquire skills which help them find work elsewhere. Since there is no record of the employment history of the PNG LNG workforce before and after the construction phase, the number of Papua New Guineans who have transitioned into other formal employments is unknown.
The PNG government missed the opportunity to impose stronger local employment and training targets in the PNG LNG National Content Plan. With negotiations on the Papua LNG project ongoing, it is not too late to impose stronger targets for the country’s next mega project. The PNG government should undertake a detailed survey of the project workforce to assess the skills that Papua New Guineans acquire while employed on the project, and their employability in future projects.
Given the continuing lack of quality public education and training, company training remains the only strategy to create a technically competent indigenous workforce. In this vein, one lasting benefit from the PNG LNG project is the high-quality live gas process training facility in Port Moresby, which provides skills for the oil and gas sector. Given the low level of workforce skills in PNG, there is little risk that increased training will result in an oversupply of skills any time soon.
Read the full discussion paper here.
Thank you for a very informative and insightful discussion paper. The message is clear. PNG needs to prepare for these projects well in advance because our plentiful Oil & Gas resources means that there are more development projects in this industry beyond Papua LNG.
Oil & Gas Industry construction projects are different to many other extractive industries. They are not only have very high up-front investment costs but are short-lived and very labour intensive and technologically complex. Due to the comparatively very high up-front level of investment required for construction, it requires a long period after production commences to return a profit.
While I do believe Oil & Gas Industry Developers have a high level of responsibility to maximise their employment of local workers and local businesses, it is not their sole responsibility to train and develop them.
• The short timeframe of Oil & Gas construction projects makes it unrealistic for them to train large numbers of skilled workers to replace those usually imported from overseas at these times. In fairness to PNG LNG, they did an incredible amount of training in a short time. They also trained over 300 highly skilled PNG operator and maintenance technicians who now make up around 70% of the workforce supporting the production and export of LNG.
• Why should it be the responsibility of the Oil and Gas Project Developer to organise ongoing employment for short-term workers after the construction programs is executed? The Government of PNG has the power to space the different construction projects so they do not coincide and render the PNG workforce incapable of meeting exceptional demand.
• The PNG Government knew that PNG LNG was pending over 10 years before it began. They have known since before PNG LNG went into production that Papua LNG would begin construction. However, at no stage have the Departments of National Planning, Labour and Industrial Relations, or Education (TVET) make any realistic attempt to align and fund the technical education and training in PNG to develop a workforce to meet the projected demands.
• The PNG Government, on behalf of the people, get 22.5% share in all Oil & Gas projects with zero up-front investment risk. A realistic amount of this considerable revenue win needs to be re-invested in educating and training our PNG workforce so that it is ready for future projects and is able to be employed overseas during periods of low activity at home.
• It is time for the PNG government and its donor partners to stop bashing industry, cease doing endless expensive studies and writing white papers. It is time to put some real scores on the board in regard to developing our own people rather than just collecting profit.
End Note: I recently had the privilege of flying to many parts of Gulf Province. It struck me how undeveloped this Province remains almost 20 years into the 21st Century. Rimbunan Hijou and their many subsidiaries have during the past 30-40 years logged over 60% of the Province, yet there is almost nil tangible evidence of health, education and transport infrastructure anywhere in that Province to represent the billions of Kina paid to the Provincial and National Government over this time.
Sir, you have made a valid point. I do believe in what you have discussed. I’m one of your Ex-Student at St. Xavier’s High School back in 1982-85.
Thank you. That was well articulated. An idea thrown around earlier was that the multinational companies and PNG government may have to include program quota for trade apprenticeships and internships schemes. So not to poach and leave the trade workforce after the development phase of the project lapse, but to actually trained new graduates from the vocational schools, technical colleges and universities.
I would rather see discussion papers like this make clear recommendation/s on studies… what was learnt and how can future project developments be national skill development orientated.
What are the recommendations?
Thanks PNG Insight for your comment.
The lesson is that the PNG government missed the opportunity to impose stronger local employment and training targets in the PNG LNG project National Content Plan.
The recommendations are that 1) with negotiations on the Papua LNG project ongoing, it is not too late to impose stronger targets for the country’s next mega project; and 2) the PNG government should undertake a detailed survey of the project workforce to assess the skills that Papua New Guineans acquire while employed on the project, and their employability in future projects.