ADB to fund BP's Tangguh gas project

Down to Earth No 68  February 2006

Despite protests from NGOs, the Asian Development Bank has approved a loan for BP's giant Tangguh gas project in West Papua.

In December 2005, the Asian Development Bank (ADB) decided to put US$350 million towards the $5.5 billion gas extraction and liquefied gas processing plant, now being developed by Anglo-US multinational BP, in Bintuni Bay, in the western part of West Papua.

This project has attracted critical attention because of the actual and potential impacts on local people and the environment which supports their livelihoods. West Papua's history of violence against the indigenous population by the Indonesian security forces associated with resource extraction has also been a major concern (see DTE 65 for more background).

DTE's letter to the ADB Board members pointed out that the development is located in an area where indigenous Papuans were not able to exercise their right to free, prior and informed consent due to the security situation and the denial of customary land rights at the time land acquisition for the project began. The letter also highlighted:

  • the fact that human rights abuses by the security forces in West Papua are widespread, with little or no attempt to bring perpetrators to justice;
  • the increase in military personnel in West Papua, including a new Kostrad (Strategic Reserve Command) division in Sorong - relatively near the project location, in the western part of the territory - and the potential for an increase in human rights violations;
  • the social tensions caused by the project in the impacted villages, and the fact that some affected villagers have opposed the project;
  • the serious concerns expressed by civil society groups in Papua and internationally in a December 2004 letter to BP and which centred on human rights, transparency and the wider Papuan context (see;
  • the vehement opposition to the project by many Papuans, because they believe Indonesia has no right to make decisions over, or benefit from, resource extraction in a territory which was acquired by force and without any genuine act of self-determination for Papuans.
  • the concerns over environmental impacts, which threaten mangroves, fisheries and local livelihoods.

The letter also stated that the project is aimed at serving the needs of international gas consumers, rather than the Papuans' own energy needs and is based on the priorities of private companies and the Indonesian government, rather than on Papuans' own development priorities. As such the project

"will lay the ADB open to the question why public money is being channelled to this project, when it could be used to promote sustainable, renewable energy which benefits the local population and which contributes towards poverty alleviation". (DTE letter to ADB Board members, 13/Dec/05)

A joint letter from Indonesian NGOs WALHI (the Indonesian Environment Forum), mining advocacy network (JATAM) and the Anti Debt Coalition (KAU); pointed to the project's flawed environmental impact assessment and to community dissatisfaction with the low compensation levels paid for their land.

The Indonesian NGOs also protested at the total lack of information available in the Indonesian language, which was crucial to enable informed public participation in the ADB decision-making process. The NGOs called for the decision on financing Tangguh to be postponed pending the provision of complete information to the Indonesian public, including in the Indonesian language. (WALHI, JATAM. KAU letter to ADB, December 2005)

The US-based NGO, Environmental Defense, wrote to the ADB to support the Indonesian NGOs' concerns. Referring to a November 2005 report by the ADB president, which recommends that board members approve the loan, the NGO points to concerns over access to resources restricted by the project's gas installations, plus pollution from the LNG plant. Environmental Defense was concerned that the Bank failed to prioritise identified social and environmental risks in its recommendation report, focussing instead on the project's economic risks.

Despite the many well-publicised concerns, the ADB president's report to the board argues that the loan is justified because it will, among other things, contribute to sustainable economic growth (and thereby poverty reduction); demonstrate a resumption of private sector confidence in Indonesia; and reassure the government, private investors, LNG purchasers and financiers that the project meets international standards and best practices, "with critical environment and social requirements being fully satisfied."

According to the ADB's project profile, Tangguh is also in line with the ADB's energy policy that supports the development of 'cleaner' fuels with private sector participation and will provide 'environmentally benign' LNG to support cleaner fuel usage in other countries in the region, especially China and Korea. According to Tangguh's environmental assessment documents, summarised and updated last year by ADB, the project will still produce 4.67 million tonnes of carbon dioxide per year to produce 7.6 mt LNG per year. The CO2 produced by burning the LNG will produce a further 20.9 mtpa. While this represents a reduction in CO2 emissions from coal (calculated as producing 40.88 mtpa for the same amount of energy) it is still hard to see how 25.57 million tonnes of CO2 can be described as environmentally benign.

Moreover, these 'benefits' will be enjoyed far from Papua, while local people suffer from increased pollution in the immediate environment. As highlighted in Environmental Defense's letter, ADB's report to the board indicates that the levels of CO2, sulphur dioxide, nitrogen oxides and particulates will contribute to local air pollution, but these environmental costs will "to some extent be offset by any environmental benefits to be gained by replacing coal or oil with LNG." Environmental Defense responds "this argument is hardly one that bodes well for the health of project-impacted peoples or for the ADB's 'development mandate' requirements." (Environmental Defense letter to ADB, December 2005, see


Poverty reduction?

Past experience in West Papua shows that resource extraction projects are not linked to poverty reduction. The Freeport/Rio Tinto gold mine has been operating for more than three decades, bringing vast profits for the company shareholders and substantial tax revenues for the Indonesian government. Officially, Papua is the second wealthiest province in Indonesia. However, it has not helped lift the West Papuan population out of poverty.

Recently published World Bank figures show that, despite an average growth rate of 10% over the past ten years, and the increased revenue flows since 'Special Autonomy' was introduced in 2002, forty percent of Papuans still live below the poverty line - more than double the national average. A third of Papuan children don't go to school and nine out of ten villages do not have basic health services with a health centre, doctor or midwife.

Given this history, what is the guarantee that Tangguh - and the public money that the ADB is contributing - will bring about meaningful poverty reduction?

(Source: Papua Public Expenditure Analysis Overview Report, executive summary, received 9/Nov/05, Guardian Unlimited 29/Nov/05)


Papua's wider context studiously ignored
The ADB's 30-page report to the board makes no mention of Papua's wider political context, despite its clear relevance for the project.

Issues of concern include the increasing levels of troops stationed in Papua (see DTE 65) and the ongoing atrocities committed by security forces against Papuans. Recent incidents include troops firing into a crowd in Paniai in January 2006, killing a 14-year old school student and seriously wounding two others.

West Papua's political turmoil too, has direct relevance for the project's legitimacy and economic impacts. Late last year, the 1969 'Act of Free Choice' in West Papua was confirmed as a sham in a report commissioned by the Dutch government. The five-year study, by Dutch academic Professor Pieter Drooglever, was launched in November. It details the fraudulent process which resulted in West Papua's illegal annexation by Indonesia. The report also documents the international political influences that led key governments to support the annexation, even though the Act of Free Choice had been anything but free. The Dutch foreign minister has since assured Indonesia that the report is 'superfluous', but it is expected to lend weight to international calls for the gross injustice of 1969 to be put right.

The report was welcomed by Papuans, but demonstrations in the capital, Jayapura, organised to highlight the findings, were broken up by police. The report is expected to give a boost to Papua's independence movement, which Indonesia remains determined to suppress. Jakarta's half-hearted commitments to Special Autonomy for West Papua have not, as designed, undermined the pro-independence voice. There is widespread opposition to Jakarta's attempt to divide West Papua into two or more provinces, and to impose an unelected Papuan Peoples Council (MRP) to rubberstamp this process. The MRP was inaugurated on October 31st. and is supposed to give some decision-making powers to Papuan indigenous, women and church representatives. The fact that MRP members were selected, rather than elected, sparked demonstrations and more suppression by the security forces.

A Papuan voice
The ADB's decision not to consider the wider context chimes with BP's own position - a position which has been challenged by civil society groups within Papua itself and internationally.

In a letter to BP, Papuan Baptist churches leader, Reverend Socratez Sofyan Yoman, wrote in July 2005:

"Your website and brochures say that everything in your 'Project Area' is wonderful. You tell us that you have built a new village and that you are being so careful not to harm the shrimps in our sea. You show photos of smiling Papuan children, but you do not say that outside your 'Project Area' my people are being slaughtered like pigs by the same government you share tea with in Jakarta and Jayapura. What gives you the right to split one part of our land away from the rest and say that everything in 'your area' is fine?"

He also points to the link between profit-making projects, the military and human rights abuses, warning BP that it will be difficult to avoid the mistakes made at the Freeport/Rio Tinto gold mine (see separate article).

"Whether you like it or not, wherever there is money, the TNI will be there sooner or later to lap it up. They will create an 'incident', blame the OPM* and then insist that they provide 'protection', at a price, for a 'vital national asset'. You say that you are being so careful to avoid Freeport's mistakes, but I have to say on behalf of my people that if you really cared about us Papuans as much as you say, you would not take this very great risk with our lives." (Letter to Lord Browne, BP chief executive, 30/Jul/05)

(Additional source: Tapol letter to Jack Straw 24/Jan/2006. Tapol has also written to the British foreign secretary to protest against Indonesia's deployment in West Papua of British-made armoured personnel carriers fitted with water cannons - see

*Organisasi Papua Merdeka = Free Papua Movement