Photo: Westpac Bank Senior Economist, Justin Smirk. Credit: Westpac Bank
The postponement of the Papua Liquefied Natural Gas (LNG) investment until next year will maintain the lack of foreign exchange as an issue this year, slowing down growth, said Justin Smirk, a senior economist at Westpac Bank. He noted that Papua New Guinea's economy was projected to rebound strongly this year, but the delays in LNG project implementation will likely lead to more restrained growth, as the investment surge is postponed to 2024.
Nonetheless, Smirk identified a window of opportunity for Papua New Guinea in the next five years, as he explained, "there’s an underinvestment in carbon-based energy, but carbon-based energy has not completely vanished from our society yet; demand for it is still rising on many components." He also mentioned that "LNG is an important transition field; its demand will remain elevated during this time of inadequate investment in LNG worldwide."
Smirk stated that there is a shortage of carbon-based energy due to western banks and investors becoming less confident in purchasing and holding carbon energy-based assets to decrease their carbon footprint. He commented, "We're observing that oil and gas prices remain well-supported outside the Ukraine crisis. That puts PNG LNG in a good position to capitalise on this window of opportunity during this transitional period."
Furthermore, Smirk highlighted that the LNG shortage is unlikely to disappear, as he stated, "unlike expectations of a few years ago where people believed there would be too much LNG in the world, this shortage will not dissipate." He added, "its demand will remain elevated during this time of inadequate investment in LNG worldwide. Therefore, unlike expectations of a few years ago where people believed there would be too much LNG in the world, this shortage will not dissipate."