A new report on a partly Australian-funded Papua New Guinea gas project warns landowner discontent could "spiral out of control".
A partly Australian-funded liquefied natural gas project in Papua New Guinea's southern highlands has the hallmarks of another Bougainville civil war, a report warns.
The ExxonMobil-led project, which attracted a half billion dollar Australian government loan in 2009, supplies eight million tonnes of gas a year to Japan, South Korea and China.
Despite gas flowing since 2014, landowners in Hela province are yet to receive royalty payments, resulting in escalating tensions, tribal violence, incidents of hostage-taking, blockades and sabotage.
A report from Jubilee Australia, which is part of the left-leaning Australia Institute think tank, warns there are risks landowner discontent could "spiral out of control".
They fear it might force the PNG government into a military crackdown.
"The build-up of arms has accelerated to a pointed where it is often speculated that the landowners are in possession of more firepower than the entire PNG defence force," the report says.
ExxonMobil responded to the report, saying it had been instrumental in driving economic growth in PNG, producing significant benefits for local businesses, and thousands of jobs for local citizens.
The company said addressing developmental challenges in the country required ongoing collaboration, and it had been working to assist communities in the Highlands since construction of the project began.
"Understanding the cultural and socio-economic context where we operate is central to our social investment program that maintains a focus on education, community health and broader socio-economic development," it said.
"We regularly engage with communities to keep them informed of our activities. Legitimate issues that may arise are managed through a rigorous grievance management process to quickly address any concerns."
Between 1987-1997, 20,000 people died in a civil war between PNG and its Bougainville province. Panguna, one of the world's largest copper and gold mines, sparked the conflict.
The report is scathing of undelivered infrastructure projects resource companies promised landowners including roads, airports, hospitals, housing and sewerage projects.
Report author Michael Main, who spent seven months in Hela province, said the vast majority had not been built. A few were incomplete or not maintained properly or were white elephants.
He pointed to the Komo hospital, which has no equipment, staff, fuel for its generator, or beds.
The gas project was partially funded by Australia after the export credit agency Efic made its largest-ever loan of $500 million to ExxonMobil, OilSearch, Santos and the PNG government in 2009.
The report is critical of the due diligence undertaken by consultants paid for by ExxonMobil.
It calls for a full Senate inquiry.
Last month, Jubilee Australia released another report which concluded the touted economic boom from the project had not eventuated and the PNG people would have been better off if it hadn't gone ahead.
PNG Prime Minister Peter O'Neill dismissed the report as fake news, despite admitting he hadn't read it, while some of his ministers acknowledged the government had some lessons to learn.