Effects on the PNG Economy of a Major LNG Project*

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ExxonMobil is undertaking an LNG project in Papua New Guinea (PNG) with setup expenditures in 2010–2012 of $A12 billion and annual export revenue averaging $A4 billion (2010 prices) over 2013–2042. These are huge numbers relative to PNG’s GDP and exports ($A10 billion and $A6 billion in 2010). This paper uses a dynamic computable general equilibrium (CGE) model to estimate impacts in PNG on consumption, sectoral outputs, wages, trade and the real exchange rate under three macroeconomic management scenarios. The Project offers significant benefits but figures on Project size give an exaggerated impression. The focus should be on the use of PNG factors of production and revenues flowing to the government.