Aceh: Exxon Mobil shuts down

Down to Earth No. 49, May 2001

In March the US-based oil company Exxon Mobil announced it was suspending operations at its Aceh oil and gas fields due to the deteriorating security situation. It is no coincidence that only days later, the Jakarta government announced it would step up military operations in the conflict-ridden territory.

Exxon Mobil announced the temporary shut-down of operations in Aceh on March 9th. The company said the decision was taken because of security concerns for its staff and people living near its operations. In the days following the decision, top-level staff were evacuated to Medan in neighbouring North Sumatra and PT Arun, the LNG processing plant part-owned by the company, officially suspended operations. Reports circulated that other major industrial installations in Aceh - two fertiliser plants and the Kertas Kraft pulp plant - which rely on PT Arun for fuel, would follow suit.

For many years Exxon Mobil has been associated in the minds of a war-weary Acehnese population with the Indonesian military's reign of terror in towns and villages near the company's operations. As a 'vital enterprise' Exxon's operations were placed under heavy military guard. Company equipment was used to dig mass graves for massacre victims and its buildings used as centres of torture. Local NGOs have called on the company to take responsibility for human rights violations (see DTE 48). It is not surprising that the company's decision to suspend operations was welcomed by many local people. However, their relief may turn out to be short-lived: Jakarta's response is to send yet more troops to the region.

After officially declaring the Free Aceh Movement (GAM) a "separatist movement", the Jakarta cabinet announced in March "limited military operations" for Aceh. The move, which is seen as a boost to the military and a set-back for President Wahid, acts against the progress in negotiations between Indonesia and the GAM brokered by the Henri Dunant Centre in Switzerland. In the latest agreement reached in mid-February, both sides agreed to replace the so-called Humanitarian Pause (agreed in May last year) with locally-negotiated security arrangements between field commanders on the ground.

There have been no concrete results from the Humanitarian Pause or from the one-month moratorium on violence agreed in mid-January this year - indeed the levels of violence have continued to escalate. Fears that human rights defenders continue to be targeted by the security forces were confirmed when three volunteers working for an NGO helping torture victims (RATA) were tortured and killed in December last year. Three months later, on March 29th, two human rights workers and their driver were murdered shortly after leaving a police station in South Aceh. Nevertheless, the latest decision by Jakarta can only make the chances of a negotiated peace even more remote. Recent reports suggest that a further 6,000 troops are ready to join an estimated 30,000-strong military force already in the territory. Human rights groups are concerned that, with the increase in troop numbers, the armed conflict with GAM will intensify and bring more suffering to the civilian population.

(Source:Reuters 30/Mar/01; Jakarta Post 12/Mar/01; Tapol Bulletin 161, Mar/Apr/01; New York Times 24/Mar/01)


Economic pressure

In the continuing economic crisis, the Indonesian government is clearly under great economic pressure to persuade Exxon Mobil that it is safe to resume operations. LNG exports from Arun earn more than US$1.8 billion per year from a production of 11 million tonnes per year. Some 225 shipments annually are made, mostly to Japan and Korea. The LNG processing complex at Bontang in East Kalimantan, which produces twice as much as Arun, has been designated to take over supply commitments to these consumers but can only do so until the end of May. This is why the Jakarta government has been pressing Exxon to restart operations by then.

The situation has caused some friction between Exxon Mobil and the government, with President Wahid openly accusing the company of using the security situation to put pressure on Jakarta to renegotiate its contract. Under its production-sharing contract, Exxon takes 30% of revenues from the gas sales while the state-owned oil and gas company Pertamina, takes 70%. Pertamina says it stands to lose $100 million per month if the suspension continues.

In April Pertamina was reported as saying it would take over operations in Aceh if Exxon failed to start up again by June. This report was later denied.

To convince Exxon Mobil that it is safe to restart operations, the government has sent in more than 2,000 extra troops to guard the company's facilities. Exxon remains sceptical however and has resisted naming a target date for reopening the plant. In March, the New York Times reported that the energy and mineral resources minister, Purnomo Yusgiantoro, was forced to abandon an attempt to visit the site when shots were fired at his plane, preventing a landing. President Wahid also postponed a trip to the territory the same month.

For its part, GAM denies targeting the company itself, but regards the military forces guarding the facilities as a legitimate target.

(WSJ.COM News Roundup 24/Mar/01; Jakarta Post 18/Apr/01, 13/Mar/01)