Rights & environmental disputes flare

Down to Earth No. 48, February 2001

As huge oil and gas developments continue in Indonesia, communities in areas where these industries operate are becoming more vocal in demanding a stop to pollution and fair compensation.

Communities in Riau, East Kalimantan, Aceh, and Java are engaged in an unequal struggle with some of the world's most powerful transnational companies. Their demands range from compensation for damage to lands and livelihoods, to jobs and fair treatment at work; from a share in the profits, to calls for companies to get out.

These communities can count on very little support from the government, either central or local. As a mainstay of the Indonesian economy, and central to the country's export-oriented economic "rescue" strategy, the oil and gas sector continues to receive priority attention from Wahid's Jakarta administration. Gas especially, is being talked up as the main source of income for Indonesia in the future.

The government is trying to push through a new oil and gas bill by April this year which will pave the way for the privatisation of the giant state-owned oil company, Pertamina, and open the door to more foreign competition in domestic markets. Two previous attempts to pass a new law have failed.

These economic imperatives mean that continued exploitation of reserves will be prioritised over the rights and needs of local communities. Local authorities can't do much to influence central policy even if they wanted to (and reports indicate that they are more interested in securing revenues than curbing the industry's effects on their people): under regional autonomy, decision-making about oil and gas remains firmly under central government control.

Internationally, there is strong government support for the transnationals, despite their growing acknowledgement of the oil and gas industry's contribution to global warming. With President Bush's new, pro-oil administration moving into the White House, we can expect even firmer support for American oil companies in Indonesia, including the mega-corporations Exxon-Mobil, Chevron/Texaco, Conoco and Amoco/Arco.


Riau Caltex protests

In Riau province, Sumatra, separate community protests against US-based oil company PT Caltex Pacific Indonesia, have centred on demands for compensation, jobs and a share in company profits. Caltex, a joint venture of Chevron Corp and Texaco Inc. is Indonesia's biggest producer of crude oil.

In early November, villagers demanding compensation for land, set fire to 4 oil wells in the Batang oil field, causing as much as $240,000 damage. Five people were held for questioning.

The same month, a leader of the Sakai indigenous community, M. Yatim, said he was asking for a 1% share of the company's total profits, to help improve the living standards of the Sakai community. He accused Caltex of "robbing and exploiting their land." Yatim said he had sought the support of the Danish Ambassador, Michael Stenberg, who had met him on a visit to the province. The ambassador was quoted by Detikworld as saying he would be "ready to struggle for the Sakai" and would bring their concerns to the Danish parliament.

In January, members of the Sakai community staged an occupation of company offices in West Dumai. They demanded that their compensation claims be met by the end of the month.

The following week, unemployed youths took at least 20 cars belonging to a company contractor in protest against the company's refusal to employ them. More than a hundred Sakai villagers in Mandau, Bengkalis district, were reported to have been arrested in the police action that followed, when they refused to give back the vehicles. But the involvement of Sakai youth in the incident was denied by community elder M.Yatim, who accused others of trying to damage the image of the Sakai.

Local people commenced attacks on Caltex installations in August last year (see DTE 47). 
(Source: Straits Times 8/Nov/00; Dow Jones Newswires 7/Nov/00; Petromindo 21, 23/Nov/00, 16,20,24 & 26/Jan/00)


Labour action

In late November, the company was hit by a strike organised by the SBSI union. Hundreds of people working for Caltex's 33 sub-contractors held a protest in Duri, demanding higher wages. The strike, which involved more than 3,000 workers and lasted several days, forced work on 17 drilling rigs to stop. It provoked a strong response from energy and mineral resources minister Purnomo Yusgiantoro, who said he would ask the police to break up any strike which could affect oil production by Caltex. He also said he had told the company to "call him directly " at any time its production activities were disrupted.

In January around a hundred former Caltex workers demonstrated outside the company offices in Rumbai, demanding the settlement of their pension claims. The company promised to deal with their claims within one week. The same month, a local NGO, FPTK, filed a suit against 16 firms operating in Riau, including oil and gas service companies PT Halliburton, PT Schlumberger and PT Borindo. The companies are accused of discrimination against their Indonesian employees, failure to provide minimum safety in their working conditions and violation of ILO standards. (Petromindo 21, 23/Nov/00, 19, 20/Jan/00)



The Riau provincial administration appears to be more interested in gaining a share in one of Caltex's oil projects that it is in addressing the conflicts the company's operations have caused.

When Caltex's contract on the CPP block expires in August this year, Indonesian interests will take over. CPP currently produces from 60,000 - 80,000 barrels of crude oil per day - a small portion of Caltex's total daily production of 695,000 bpd. The Riau administration had wanted a controlling share in the CPP block, but the Wahid government has rejected this, preferring Pertamina as majority partner. Months of wrangling appear to have resulted in a 20% share for the provincial authorities, who are still pushing to operate the block. Riau students who have also pushed for local control over the project are demanding that the block be closed down if the local authorities are not given the opportunity to operate it.

In the period immediately following Suharto' resignation in 1998, Riau was one of the resource-rich calling for independence if it was not given more control over resource. 
(Petromindo 7/Dec/00; 13,24,25/Jan/01)


Mobil Aceh rights abuse investigation

American oil and gas giant ExxonMobil has again been accused of involvement in human rights abuses in war-torn Aceh.

An investigation into the presence of military and police personnel at the company's operation in Lhokuskon, North Aceh, found that ExxonMobil spent Rp 5 bn (around $530,000) per month on the security forces. The investigation, by Indonesian NGO Kontras, found at least 17 military and police stations with a total of 1,000 personnel financed by the company. Kontras co-ordinator Aguswandi said his organisation held Exxon-Mobil "morally, politically and legally responsible for the crimes against humanity in Aceh". (Petromindo 21/Nov/00)

In 1999 a group of Indonesian NGOs first accused Mobil of involvement in human rights abuses (see DTE 39 & DTE 40 for more).


East Kalimantan: Unocal and Vico

Protests over pollution and compensation at Unocal's Tanjungsantan oil and gas terminal ended in violence last October, when police moved in to break up a blockade (see DTE 47). Now the US-based company is embroiled in another dispute, this time further south, in Semboja sub-district, Kutai. Unocal has denied that it is polluting seas and fish-ponds along the Muara Jaya coast, citing research it has carried out with Mulawarman University. Local people have complained of declining fish stocks in the seas and premature deaths of fish in their ponds since exploration started in April 2000. Local people point out that the drilling wells are only 500m from the coastline.

Meanwhile, farmers in Bukit Raya village, also in Semboja, are demanding compensation from another US-based company, Vico, for land reportedly used to build a pipeline and polluted by waste. In 1999, villagers affected by the operations of Vico, Unocal and Total Indonesie issued a joint statement demanding restoration of their rights over the lands, the withdrawal of security forces from negotiations, compensation and rehabilitation (see DTE 43:16). 
(Petromindo 19 & 24/Jan/01)


East Java: Premier Oil

Exploration by British company, Premier Oil is dividing the community of Ujungpangkah, Gresik district in East Java. According to a report in the local Surabaya Post, three employees from the company were taken hostage by local people, and only released when the company agreed to suspend operations until the beginning of February.

An investigation by two factions of the Gresik district assembly found that Premier's exploration site - the estuary of the Solo River - could endanger the environment and cause loss to fisherfolk and farmers as it was too close to the shore. Assembly member Masluh Fanani said villagers also rejected the oil and gas firm's operations because they feared the negative impact on their religious and social life. There was concern that the operation would bring in prostitutes and villagers were displeased by the fact that Premier's workers had held what was reported as a 'drinking party' during the fasting month.

Premier Oil, which counts Singapore's Keppel and the US-based Amerada Hess among its investors, has been severely criticised for its investments in Burma. (Petromindo11, 19 & 25/Jan/01, Financial Times 21/Dec/00 & others.)


Companies to offer 10% shares to regions

The government is preparing a presidential decree which obliges oil and gas investors to divest up to 10% of shares to regional administrations, according to a senior official at the Ministry of Energy and Mineral Resources. The divestment obligation is already part of production sharing contracts, what's new is that regional administrations will be given priority when shares are sold. 
(Petromindo 22/Jan/00)

This will put further pressure on local governments to raise revenues - in order to buy into the companies. It also means that local governments can hardly act as a neutral party in disputes between companies and communities.


More projects, more conflict

It is likely that conflicts and environmental damage will become more frequent as some of the huge investment projects, currently under development, start production.

One giant project that has already started is the piping of gas from fields around the remote Natuna islands in the South China Sea to Singapore's Jurong island. The project, inaugurated in January by President Wahid, is Indonesia's first gas export project through pipelines - this one is a massive 640 km long and cuts across one of the world's busiest sealanes. The investment consortium includes state oil company Pertamina, Conoco (US) Premier Oil (UK) and Gulf Resources (Canada). Exporting 350 million cubic feet per day, the companies are expected to make around US$22 billion of revenue from sales over the next 22 years.

Major projects currently under development include:

  • oil and gas in the Makassar Straits, off East Kalimantan, controlled by Unocal. Development of the West Seno oil field, discovered in 1998, will bring deep-water drilling to Indonesia for the first time. The field, which is expected to produce 60,000 bpd and will start up at the end of next year, is located in water depths of 1,000 metres. The company has reached agreement with US giant Exxon-Mobil (see box on Aceh) to buy its 40% and 50% shareholdings in two Makassar blocks, but this has to be approved by Jakarta and state oil company Pertamina is showing interest in getting involved in the project.
  • the Belanak oil field in West Natuna, Riau province, which will produce 100,000 bpd and start up by the year 2003. This project, being developed by a subsidiary of Conoco (USA), will have the world's largest floating storage facility - used to offload liquefied petroleum gas onto tankers. The project will also supply gas to Malaysia through a 97-km underwater pipeline. Conoco is also carrying out oil exploration in a 150,000 ha area of the Lorentz national park, West Papua, according to the provincial natural resources conservation agency.
  • another gas pipeline project from gas fields in Central South Sumatra to Singapore. Consortium members include Gulf Resources, Santa Fe Energy Resources (US) and Pertamina. Indonesia will earn around $400 million a year, producing 350 million cubic feet of gas per day over a 20 year period, starting 2003.

(Petromindo 23, 25, 26 & 29/Jan/01, Jakarta Post 30/Nov/00, 21/Dec/00, 26/Jan/01; Business Times 19/Jan/01; Indonesian Observer 22/Sep/00; MinergyNews.Com22/Sep/00 )



There will be more exploitation in future too: Indonesia is auctioning 21 exploration blocks this month, and, unlike the mining sector, there is strong interest from foreign investors. Gulf Resources (Canada) has already said it will be participating in the tender, and other companies are expected to be drawn especially to the 6 blocks in the Makassar Straits. Other blocks include 2 in the Natuna Sea, 6 in the Arafura Sea (West Papua), three in Kalimantan, two in South Sulawesi and two in the Seram Sea.
(Dow Jones Newswires 26/Jan/01; Petromindo 20/Jan/01)


Oil refineries

Several foreign investors are preparing to go ahead with delayed oil refinery projects, according to Indonesia's Investment Co-ordinating Board (BKPM).

Due to the economic crisis, none of the 20 oil refinery projects approved since 1992 were started. These included 18 foreign investment projects whose Indonesian partners were mostly drawn from companies owned by Suharto family and cronies.

One UK-based investor, Mayhill International Trading & Services, said in January that it would go ahead with a $1.4 billion refinery project in Sumbawa (West Nusa Tenggara) to start operations by September 2005. The refinery would use oil from Iran and have an output of 150,00 bpd. Reports in October last year said Mayhill was involved in two refinery projects, in Aceh and Lombok (see DTE 47)

Two (unnamed) US investors plan to build a refinery in Tanjungjabung, Jambi province (Sumatra) with a processing capacity of at least 30,000 bpd.

In December, BKPM approved two oil refinery projects in Pare-Pare (Sulawesi) and Batam (Riau) 
(see also DTE 47). 
(Jakarta Post 24/Nov/00; Petromindo 22/Jan/00)


Oil sludge

Indonesia's environmental impact management agency, Bapedal, has threatened legal action against oil and gas companies that fail to submit reports on their waste and waste management systems. Bapedal's Masnellyarti Hilman also said district or sub-district heads could shut down companies which violated the law under article 25 of the Environmental Law.

A tough approach looks unlikely, however. Masnellyarti said Bapedal would send staged warning letters as it would take time for companies to establish sound sludge treatment systems.

Masnellyarti said there were three 'oil sludge' cases reported: in Tarakan, East Kalimantan (PT Expan), Riau (Caltex) and another in West Papua.

The Tarakan local authorities have asked Bapedal to put pressure on oil companies operating in the area, which have produced thousands of barrels of sludge.

(Petromindo 16&18/Jan/01)


Disappearing islands

Seven islands in Riau province have disappeared since 1980 as a result of environmental degradation, according to the Indonesian Forestry Study Institute (LPHI) Sumatra.

Mangrove forests lining the shores and acting as buffers to coastal erosion have been destroyed by leaks of crude oil from tankers, and offshore rigs. Coral reefs have also been destroyed.

One of the vanished islands, Bangkau, which covered more than 2000 hectares, was inhabited by at least 140 families in 1970. (Detikworld 23/Nov/00)