News: OSH Papua New Guinea starts paying landowners LNG royalties

MELBOURNE, Sept 13 (Reuters) - The Papua New Guinea government has started paying local landowners long awaited benefits from the $19 billion PNG LNG project, in a promising sign for energy giants ExxonMobil and Total looking to invest billions more in the country.

The PNG liquefied natural gas project, operated by ExxonMobil Corp XOM.N , has been exporting for more than three years, with a 2-percent royalty set aside for landowners, but payments had been held up by disputes over who is eligible.

The royalty funds have been held in trust by the government while it vets landowners, a prolonged process that has triggered violent clashes over the past three years and threatened to disrupt PNG LNG operations.

"Important progress has been made with the government of PNG commencing payment of royalties to relevant landowner groups around the PNG LNG Plant near Port Moresby," ExxonMobil PNG said in emailed comments to Reuters on Wednesday.

The PNG prime minister's office, treasury department and Bank of Papua New Guinea did not respond to requests for comment.

Progress on resolving the disputes comes as a relief for ExxonMobil, France's Total SA TOTF.PA and their partners who are in talks to invest billions of dollars in new gas fields to double LNG exports from one of the world's lowest cost sites.

The government has made resolution of the landowner issues a priority in a 100-day plan it set out following elections in July.

Peter Botten, managing director of Oil Search, which is also a partner in Total SA's TOTF.PA Papua LNG project, told Reuters in August a key hurdle to the companies' plans was getting the government to complete the landowner vetting process.

"This is a really good step toward sorting out benefits payments," an Oil Search spokeswoman said on Wednesday about the government's first payments to landowners.

Identification of those eligible for royalties still needs to be resolved with landowners in the impoverished highlands, where gas is produced and piped to the LNG plant.