The Tangguh gas project: what hope for human rights protection in a worsening political climate?

Down to Earth No. 60, February 2004

With the political context worsening and militarisation in West Papua increasing, BP's commitments to human rights and its 'community-based security policy'- look more and more flimsy.

In 2003, West Papua continued to suffer the impacts of Indonesian military repression. The resumption of all-out war in Aceh and the threat of follow-up action in West Papua, confirmed the re-emergence of the military (TNI) as a dominant force in national politics and its practice of silencing pro-independence voices by force. During the year there was mounting concern over the build-up of TNI-backed militias in West Papua, the sustained targeting of human rights defenders and brutal military "sweepings" in highland villages.

Serious human rights violations included:

• The deaths of at least 16 people who perished from starvation, exposure or at the hands of the military, following special forces (Kopassus and Kostrad) operations. The action was taken in response to a raid on an ammunition store in Wamena, in April 2003, in which two soldiers and a Papuan were killed. There is widespread suspicion that the incident was staged by the military in order to stir up trouble and justify the repression;
   
• The killing in October by TNI troops of ten Papuan men, including regional OPM commander, Yustinus Murib who actively supported dialogue and the 'Zone of Peace' conflict resolution initiative. A picture of the Murib's corpse, held up by four TNI soldiers was published in the press to widespread condemnation;
   
• The arrest in late November of forty-two Papuans for attending a flag-raising ceremony marking days in the pro-independence calendar - press reports indicated that seven of them could be put on trial for treason;
   
• The continued detention, following unfair trials, of 16 political activists from the highland town of Wamena, including Reverend Obeth Komba, a local Reverend Obet Komba, a local representative of the non-violent, pro-independence Papuan Presidium Council.(1)

The TNI is widely believed to be actively fomenting violence in West Papua and perpetuating the bloodshed in Aceh in order to maintain and increase their control over security policy in Jakarta. Violent incidents, blamed on 'separatists' who threaten the republic's 'territorial integrity' are instigated in order to lead Indonesian public opinion towards the need for a strong political role for the military as a bulwark against national disintegration. Attempts to 'break up' Indonesia are being blamed on outsiders: in January this year army chief of staff Gen. Ryamizard Ryacudu warned that Indonesia may lose Papua and Aceh due to a foreign conspiracy, and that 'separatism' could claim the lives of up to 30 million people.

Since the decision to give up the military's direct involvement in national, provincial and district parliaments - after the April 2004 parliamentary elections - the motivation to use conflicts in Aceh and West Papua as leverage has become stronger. They can act in these territories with near impunity. Although seven Kopassus officers received light prison sentences for killing pro-independence PDP leader Theys Eluay in 2001, many other crimes have not even been investigated. In January 2004 the national human rights commission, Komnas HAM said that it would be taking up just two of seven major human rights incidents proposed for investigation in West Papua.

A second, strong motivation for the TNI to maintain its heavy presence, is access to Papua's rich natural resources and opportunities to reap financial rewards from logging, mining, fisheries and protection businesses (see DTE 57 for more on this).

Not surprisingly, the militarisation of West Papua has continued, with troop numbers increasing to around ten thousand in 2003, up from an estimated 4,350 troops in 2002(2). Police numbers are also going up - early in 2004 it was announced that an extra 3,000 police would be sent to West Papua to safeguard the April elections. NGOs fear a harder line approach from the police too, now that Col.Timbul Silaen has been appointed police chief for Papua. Silaen was in charge of police operations in East Timor during the run-up to the August 1999 referendum, when military-backed pro-integration militias were permitted to terrorise the population. He has been indicted on crimes against humanity charges by East Timor's Serious Crimes Unit.

An increase of 2,000 troops announced in August 2003 was in response to protests against the splitting of West Papua into 3 provinces, specifically against the creation of 'Central Irian Jaya' which was declared in Timika on August 23rd 2003. During clashes between supporters of the new province and opponents, five people were killed and at least 50 were injured. As a result, Jakarta postponed the decision, but did not cancel it. The 3-way split into West, Central and East Irian Jaya is a long term project of the military designed to undermine the pro-independence movement and offers the potential for yet more militarisation. This policy, which the security forces have promoted since the 1980s and which President Habibie sought to revive in 1999, contradicts the softer approach to dealing with pro-independence Papuans represented by Special Autonomy measures. These were supposed to be introduced from January 2002, but have not materialised, due to obstruction from Jakarta.

Despite some concern expressed by foreign governments, Indonesia's brutal treatment of Papuans who wish to exercise their long-denied right to self-determination, has not changed one bit. The British government, like most other foreign governments which backed special autonomy as the only solution in Aceh and West Papua, has failed to express any public disappointment about Indonesia's failure to implement it. Instead it has focused on its own overriding foreign policy objective: trade and investment. Ignoring warnings from NGOs, Britain approved a massive increase in the sale of arms to Indonesia - from GBP 2 million in 2000 to GBP 41 million in 2002. In West Papua, the British government is supporting BP's investment to the hilt: Ambassador Richard Gozney attended a meeting to discuss the company's security policy. As outlined by TIAP (see box), the British aid agency, DfID, is involved with BP and other donors in joint projects in the Bird's Head region of West Papua aimed at long term sustainable growth and local government capacity-building in the region - all of which support a stable investment environment for Tangguh.

While British companies benefit from this kind of trade and investment, Papuans continue to suffer from more militarisation, military operations, the environmental impacts of rampant resource exploitation and the health effects which go along with these, such as AIDS, which has become a very serious problem in the territory.

Against this background, the exploitation of West Papua's natural resources has continued apace. The US/UK owned Freeport mine in the central mountains was removing rock-bearing ore at a rate of over 200,000 tonnes per day - until the October pit collapse in which six mineworkers were killed slowed production levels temporarily (see DTE 59). A further landslip - with no casualties - was reported in December.

The plunder of the forests is also continuing as more logging companies move eastward from the logged out forests of Kalimantan, Sumatra and Sulawesi. The Indonesian NGO Forest Watch Indonesia reckons that about 60,000 cubic meters of timber was smuggled out of Papua during August/September alone and that another 600,000 cubic meters were traded illegally over the previous year. According to FWI, foreign mafias have entered the country via cooperatives supported by Indonesian officials.

How does the Tangguh project fit in to this deteriorating political, human rights and environmental context?

Prior informed consent

One fundamental problem with Tangguh is its failure to secure the free, prior, informed consent of local communities whose lands, resources and livelihoods are affected by the project. This is common to all major resource extraction projects in Indonesia, because of Indonesia's systematic denial of indigenous peoples' land and resource rights. The result is that the potential for resentment against the development and for resulting conflict is far higher than if informed consent of local people had been secured in advance.

According to John Rumbiak of the Papuan human rights group ELSHAM, the denial of prior informed consent is one of the reasons behind what he calls the "dynamics of destruction and violence" in West Papua. To put an end to this, he says, the international community - particularly international investors -

"must, first and foremost, recognise indigenous communities' basic rights to chart their own development paths, to manage their own resources, to pursue their traditional livelihoods and cultures, and to say NO to multinational operations on their lands. The failure to respect communities' basic right to "just say no" exists at the heart of the nexus of human rights violations, environmental degradation and conflict."
(John Rumbiak, ELSHAM, Speech to Columbia University's Center for the Study of Human Rights, 2003)

Security and human rights

It is the security of the Tangguh project that has raised most concern among communities, NGOs and human rights groups. The main fear is that BP's presence will mean higher concentrations of security forces and more likelihood of human rights abuses. BP is negotiating with the police, and the state oil and gas regulatory authority BP Migas over the implementation of its 'community based security' plan. But, crucially, it has not yet secured the agreement of the TNI. Community-based security involves training and employing local Papuans as security guards - over 100 have been taken on so far - in order to involve local Papuans and make them feel that they are part of the project. International security company Shields has been contracted to provide training.

The TIAP report (see box) states that the role of the security forces in Tangguh's security strategy "remain one of the most sensitive issues for the Project." It notes that the major stakeholders agree on the concept of community based security but that the details of implementation have yet to be worked out. TIAP warns that this needs to be done quickly.

TIAP also notes that the private security force hired to guard the Tangguh site will not be directly under BP's supervision, but under a contractor. It presses BP to ensure that the contractor meets commitments to give jobs to Papuans, and proper training to limit the use of force as set out in the Voluntary Principles on Security(3).

At the heart of BP's security strategy for Tangguh is an attempt to avoid the disastrous situation at the Freeport mine, where the company pays the TNI to guard its mining operations and which has resulted in numerous cases of extra-judicial killings, torture and disappearances.

A key factor is whether Tangguh has the status of a "vital project" of national importance (Provit). Until very recently, the TNI always argued that it is legally bound to guard such projects whether the operating company requests it or not. Since the scandal of Freeport's payments to its TNI guards was publicly exposed last year, the TNI's obligations towards Provit have been under the spotlight. Military spokesmen have made conflicting statements over whether or not the TNI has a legal basis for providing security to vital national assets and whether the practice will continue. Now a presidential decree is being drafted to put the security of such projects in the hands of the police and to decide criteria for deciding what is a vital project.

The status of Tangguh itself is unclear: it has already been referred as a vital project in some military statements. But the TIAP report points out that when President Megawati inaugurated Tangguh in December 2002, she called it a "national project" but she did not say it was a "vital national object" "which would trigger specific security requirements" (TIAP 2003, p.7).

Aside from the question of terminology, the fact remains that the TNI will decide as and when it suits, whether Tangguh needs its protection, no matter what BP wants. And it is doubtful whether BP will have sufficient leverage to prevent it.

BP payments to the police

The discussion over Provit leaves out the question of the police force - which includes the notorious Brimob (special forces) - already guarding other resource projects in the area. How the new police chief for Papua, Col.Timbul Silaen of East Timor notoriety, will affect things remains unclear, but the prospects are not good.

One of the most worrying aspects of the TIAP report is its acceptance that BP should contribute to the increased police costs in the region, due to the establishment in 2003 of Bintuni Bay as a separate new district. This would mean BP entering into a financial relationship with a police force headed by a person indicted on crimes against humanity charges - an impossible position for a company claiming to uphold human rights.

TIAP reports that it was informed by the regional police that a Brimob unit must be present in all new districts. It concludes:

"BP must face the reality of providing some appropriate support for those increased costs."

TIAP recommends that such support should be approved and provided through the state oil and gas regulatory authority BP MIGAS, that it should abide by Indonesian law, and be consistent with community-based security, transparent and consistent with standards set out in the Voluntary Principles on Security, the UN Universal Declaration on Human Rights and other standards.

The report also seems to suggest that payments to the military are also likely: "The same standards should apply for any support provided to the TNI."

Payments to military and police personnel are strongly opposed by Papuan, Indonesian and international NGOs, because the financial relationship means that security forces prioritise the interests of companies over communities. Shareholders in the Freeport mine have urged the company to stop payments to security forces, for this very reason.

John Rumbiak of ELSHAM believes that "Corporations should end their financial support for military and police personnel stationed in their operation areas. These security forces are under the command of government for the national defense and should only be paid and directed by democratically elected representatives."

(Source: Tangguh Stakeholders' Update, 31/Oct/2003, TIAP report 2003; AFP 30/Dec/2003; Jakarta Post 29/Nov/2003; 6, 9,10/Jan/04; TAPOL press release 17/Dec/03; Laksamana.Net 16/Sep/03; John Rumbiak, ELSHAM, Speech to Columbia University's Center for the Study of Human Rights, 2003, October 23, Elsham News Service, October 28, 2003; Miningindo 30/Jan/04).).

(1) See Tapol Bulletin No 173/174, December 2003, for a comprehensive report. Further information from Sydney Morning Herald 7/Jan/ 04

(2) 2003 figure from Reuters report quoting Papua military commander Zainal Nurdin (Reuter 10/Sep/03); 2002 figure as announced by the military's spokesperson, Major-General Sjafrie Sjamsoeddin in March 2002 (PINA Nius Online, 16 March 2002)

(3) These were launched in 200. BP, Rio Tinto and Freeport are signatories. See
www.state.gov/www/global/human_rights/001220_fsdrl_principles.html

Tangguh project Update

Construction: main construction of Tangguh is now expected to start in early 2004 and will take around 38 months. Construction costs are now estimated at US$2.2 billion for the gas wells and the LNG plant (DJNewswires 6/Jan/04). A consortium of Kellogg, Brown and Root (US); JGC Corporation (Japan) and PT Pertafenikki Engineering (Indonesian-Japanese joint venture) last year won the bid for engineering, procurement and construction for the Tangguh LNG complex, worth around $1.4 billion. Some construction work has already gone ahead: a 1,300 meter airstrip has been constructed at Babo enabling commercial flights to the area, and new piers have been built at Babo.

Gas reserves: Tangguh holds 14.4 trillion cubic feet of proven and certified gas reserves, according to BP. Probable and possible reserves bring the total to 24-25 tcf.

Shareholdings and financing: BP owns 37.2% of the Tangguh project and China's CNOOC recently increased its share to 16.7%. LNG Japan - a consortium of Nissho Iwai Corp. and Sumitomo Corp - increased its share to 7.4%, after Britain's BG Group plc sold its stake (Jakarta Post 3/Feb/04). The other shareholders are Nippon Oil Exploration Berau (ca. 12%), KG companies (10%) and INPEX Corporation (16%). (Rigzone.com 14/Aug/2003)

In the Annex to the first TIAP report (2002) BP notes that $2,250 million of financing is required for the first 2 gas `trains' (terminals). A large chunk of the financing will come from the Japan Bank for International Co-operation (JBIC). (Reuters 5/Sep/03)

LNG sales: In January 2004 it was announced that Tangguh would sell 3.7 million tonnes of gas per year to US power company Sempra Energy, under a 20 year agreement, starting 2007. Tangguh has now secured around 6 million tonnes a year of sales, more than enough to start construction of the project. This is the third major sales agreement. BP MIGAS signed a preliminary US$1.5 billion contract with oil refiners SK Corp. of South Korea in August 2003 for 580,000 tonnes of LNG/year starting 2005. The same month, it signed a US$1.43 billion agreement to sell 550,000 tonnes of LNG/year for 20 years to the world's second biggest steelmaker, Posco (also of South Korea). In January, BP Migas said it would resume negotiations with the buyers and expected the final contract to be agreed in April. (JP 7/Jan/04)

Tangguh failed to win a contract to supply 1.6 million tonnes of LNG to Taiwan last year and in 2002 lost out to competition in securing a substantial contract with China's CNOOC to supply a Guangdong terminal. Instead, Tangguh was offered a contract to supply 2.6 million tonnes per year to a planned terminal in Fujian province, China, starting 2007. In 2001, Pertamina also signed a memorandum of understanding with GNPower to supply 1.3 million tonnes of LNG to the Philippines.

Revenues for Papua: estimates have ranged from US$100m/year by 2016 to US$225m/year at peak depending on how many LNG trains are constructed. However, in its second report, the TIAP team points to "uncertainties" regarding the future division of revenues between the Indonesian government and the provincial and local authorities depending on how the conflict between special autonomy and splitting Papua into three separate provinces works out. TIAP predicts that if division goes ahead, any revenues flowing back to Papua (through Special Autonomy, which should hand back 70% of post-tax revenue to Papua) would go entirely to West Irian Jaya, where Tangguh would be located. "Politically, the division of Papua, and the imbalances in incomes, services and infrastructure among the three Papuan provinces that would result, could well increase political instability, inevitably affecting the Tangguh project".

The report recommends disclosure of public finances and revenue allocations relating to the project. The team recognises that financial transparency will rely not just on BP but on the government publishing receipts, disbursements and revenue-sharing to the provincial or district governments and tax and royalty payments deducted. It also means the provincial government must disclose payments to districts and subdistricts and any other use of these funds.

As last year, TIAP points again to the possibility that expectations are "unrealistically high" in the Bird's Head area of Papua and highlights the need to smooth out revenue flows in advance of the estimated seven years or so until substantial gas revenues start coming to Papua. It again recommends an 'external line of credit' or a fund from which the region could borrow against future revenues. Last year, a suggestion that the World Bank may become involved in a loan arrangement to assist this process was mooted, but no further developments have been publicly announced.

Resettlement: a World Bank resettlement panel visited Tangguh for four days in October 2003 to check progress on the relocation of Tanah Merah, the village that is being moved to make way for the LNG plant. Construction of a new village started in February 2003. The actual move is now planned for early 2004. TIAP talks of a "striking" contrast between the existing homes in the village and the homes being built. It notes that some "significant issues remain with regard to relocation and compensation," but says that the attitude of villagers is generally positive and they are eager to move. (Tangguh Stakeholders' Update 31/Oct03, TIAP p.12)

Employment: there will be an estimated 3,500 workers at Tangguh during the construction phase, reducing after that to a few hundred. BP is employing local Papuans as security guards, cleaners and transport workers - over a hundred so far. There will be around 250 security guards at the peak of construction. BP has also set in motion training programmes for Papuans to work on building the resettlement village. It is not clear how successful these programmes are and BP has not reported what proportion of workers involved in construction work will be Papuans. According to a Reuters report circulated by BP, one clan-leader in Babo village demanded to know where all the jobs were as "only newcomers get them". (Reuters 10/Sep/03). BP has made a commitment to provide a job for one member of each household in each of the nine villages classified as 'directly affected'. BP has also recruited 23 Papuan college graduates who are being trained in "more sophisticated" aspects of LNG operations (TIAP 2003, p.21)

TIAP notes that the activities of BP's contractors will need continuous monitoring in terms of recruitment and training of Papuans, fair working conditions and so on and that it will not be enough for contractors to report that trained Papuans are not available. TIAP feels this is important because "virtually all Papuan government officials with whom the Panel met highlighted the issue of jobs for Papuans as one their key expectations and primary benefits to be derived from Tangguh."

Community development: these programmes are continuing in the nine 'directly affected villages' on the north and southern shores of Bintuni Bay. Programmes so far have included building raised wooden walkways and washing facilities. The budget for the community development is US$30,000 per year. 'Expectation management' - ensuring that local people understand that BP cannot cater for all village needs immediately - is a major part of BP's community work, according to the Reuters journalist who visited the site in August 2003. The TIAP team agrees: it says that "there have been thus far only modest tangible benefits to the Bird's Head region and the province of Papua other than the assistance BP has provided to the DAVs [directly affected villages] and the development at Babo. It will be necessary to show greater results in health, education and infrastructure when construction begins", says TIAP, noting that to date, "there has been no material benefit to Papuans in the important areas of education and clean water". With major construction work beginning very soon, there is not much time left. It is worth remembering that Tangguh's financing arrangements prioritises repayments to investors before any substantial revenue payments start coming into Papua.

The report also points to tension between communities on the north shore of Bintuni Bay and the communities on the south shore resulting from a perception on the north shore that they are not getting a fair share of the benefits. (The LNG processing plant is on the south shore as are the other main facilities, but part of the gasfields lie under the north shore.) TIAP recommends setting up a separate development fund to provide additional health care and infrastructure, including clean water for the north shore communities.

Community affairs manager, Paul Watory, expressed concern to the TIAP team about the effect of the influx of people from outside the area when construction gets underway, creating social envy, especially if non-Papuan migrants dominate commerce as they do elsewhere in Papua. TIAP praises BP's participation with USAID and DfID in the Bird's Head Alliance, which looks towards long term sustainable growth and local government capacity-building in the region. However, the report warns that "it is likely that some problems possibly related to alcohol, drugs or prostitution, will arise" and says that BP must be prepared to respond firmly. The report does not mention HIV/AIDs in this context - an urgent and growing problem in West Papua. It recommends that the Engineering, Procurement and Construction contractor should consider a system for rewarding achievement of targets for its subcontractors, but also monetary sanctions for violations of requirements of BP's Code of Conduct.

Local livelihoods and environment: TIAP highlights the importance of shrimp fishing for Tanah Merah villagers and states that it is critical that fishing is not disrupted. Since the relocation of the village plus restrictions on fishing arising from construction of the LNG facilities may result in a reduced catch for the villagers, TIAP repeats the recommendation from its first report that BP should support the modernisation of the local fishing fleet for villages affected by construction. The TIAP team notes that the two most serious issues facing the area are 1) the pressures from development on the mangrove forests; and 2) the depletion of fish stocks in Bintuni Bay by large commercial trawlers. Because Tangguh will likely exacerbate these problems, BP should strengthen its support for the preservation of critical mangrove forests, and support development of a fisheries management plan, including a current baseline of existing stocks. It also recommends that BP should encourage and support the establishment of a Bintuni Bay fisheries management plan aimed at the long term protection of the livelihoods of local villagers, the fish stocks and the environment. Concerns were raised to TIAP by NGOs last year that outsiders rather than local people are more likely to take control of new technology and that traditional fisheries would suffer.

According to JATAM, the Indonesian mining advocacy network, Bintuni Bay has a 300,000 hectare mangrove ecosystem, and is the largest remaining area of mangroves in Southeast Asia. The ecosystem supports a wide variety of marine life and acts as a nursery for fish and shrimp, providing a livelihood and multiple services to the different indigenous communities.

JATAM says that women will be hurt most by the transformation of their environment, since it is they who do the crab fishing - a main source of protein as well a providing an income - and depend most directly on the mangroves.

Transparency: TIAP says that much of BP's goals, programmes and benefits have not been communicated effectively and the BP needs a broader and more effective public information strategy. It reports that many people were "seemingly unaware" of the benefits already brought and had an "incomplete view" of the project. It recommends a more journalistic style, dissemination in Indonesian, in plain language with bullet points for ease of understanding and that BP should invite opinion makers like editors and journalists to see the benefits of the project.

Tellingly, TIAP notes that there was greater awareness of BP's community assistance programmes and other local benefits in the international NGO community than in the local NGO community. This fits with the company's priorities to influence parties likely to have a greater effect on shareholder opinion.