An Australian academic says the Papua New Guinea LNG project which began as transformative for the country's economy has been dealt a cruel blow.
LNG Project facility, Central Province, Papua New Guinea. Photo: RNZI / Johnny Blades
Paul Flanagan, who is a visiting fellow at the Australian National University, says the investment phase created over 10,000 jobs, introduced more skill into the economy and led to growth.
But he says just at a time the country was to benefit from revenue and foreign exchange flows from the project, international markets have taken a hit.
"It's this second stage that is unfortunately taken a fairly cruel hit by international markets over the last few months where the price of these exports is now around 35 percent lower than the time that was estimated at the time of the PNG budget."
Paul Flanagan says with good policies, adjustments can be made to deal with a drop in oil prices.
He says PNG has moved to poor policies over the last six months, such as moving away from a market-based exchange rate, starting to print money to fund the deficit, and continuing with an unsustainable fiscal policy in the 2015 budget.
However a statement from the office of Prime Minister Peter O'Neill disputes the claim that PNG will receive substantially less income from LNG sales.
It says LNG exports and prices are mainly locked into long-term forwards sales contracts, meaning PNG would receive the same price for LNG as earlier agreed to.
The Prime Minister's Chief of Staff Isaac Lupari has accused Paul Flanagan, who has been described as a close advisor of opposition leader Don Polye, of political interference.
Responding to calls by both Mr Polye and Mr Flanagan for budget adjustments, Mr Lupari adds that the 2015 budget is designed according to principles of market fluctuation and expectation that prices will change