MOODY’S BULLISH ON PNG NATURAL GAS PROJECT

PACIFIC ISLANDS REPORT

Pacific Islands Development Program/East-West Center
With Support From Center for Pacific Islands Studies/University of Hawai‘i

MOODY’S BULLISH ON PNG NATURAL GAS PROJECT
Predicts higher Gross Domestic Product

PORT MORESBY, Papua New Guinea (PNG Post-Courier, April 14, 2008) – International business ratings agency Moody’s predicts Papua New Guinea’s economic development and government bond ratings will improve with the ExxonMobil –led liquid natural gas (LNG) project.

The agency was reported by international news service Cable News Network (CNN) as saying the ExxonMobil-led consortium’s planned export facility in the country for liquefied natural gas (LNG) could, over the longer term greatly improve prospects for PNG’s economic development and its government bond rating.

CNN reported that the US$10 billion PNG LNG project – if developed — could begin exports by 2014, thereby contributing to higher GDP (gross domestic product) growth and government revenues, as well as assuring stronger balance of payment and external financial positions, Moody’s added.

Additionally Moody’s said, from a short-term perspective and despite some expected slowdown in global growth, prices of Papua New Guinea’s major commodities might stay high, while low interest rates are encouraging an acceleration in credit to the private sector and government spending is likely to rise. The ratings agency also said Papua New Guinea’s ‘B1’ government bond rating is supported by Papua New Guinea’s large natural resource base, low external debt and improving government finances but is constrained by PNG’s low development, governance problems and volatility in export earnings.

CNN reported that Moody’s also notes that despite its successful fiscal and monetary policies a commodities boom might allow it to invest more in responding to these problems. Partners in PNG LNG include among others Oil Search Limited (34.1 per cent), Santos (17.7 per cent), AGL (3.6 per cent), Nippon Oil (1.8 per cent) and and landowner interests (1.2 per cent). These interests will change when the PNG State nominee joins as an equity participant at a later date.

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