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#29046 - 23 Sep 06 23:05 Asia Sentinel/Indonesia’s gusher of gas, mud and graft
Jimmie Dean Offline

Registered: 19 Sep 06
Posts: 45
Loc: Jakarta Selatan
From Asia Sentinel

Indonesia’s gusher of gas, mud and graft
Our Correspondent
23 September 2006
A runaway gas well shows the dark stain of unaccountability and corruption in post-Suharto Indonesia

On May 28 at 10 a.m., something terrible went wrong deep inside Banjar Panji I. There, 1,800 meters into the exploratory gas well being drilled near the Surabaya satellite town of Sidoarjo, about 900 km. southeast of Jakarta, investigators believe employees of PT Lapindo Brantas, the company drilling the well, “broke every rule in the book”.

They failed to use a use the proper casing or double-valve system, setting in motion an environmental disaster that continues to today. When drillers attempted to shake loose a stalled drill bit and it broke or disappeared, a torrent of stinking, toxic mud and hydrogen sulphide gas boiled to the surface, spraying gas 10 meters into the air.

Mud and gas have continued erupting ever since, defying all efforts to stop it and inundating more than 25 square kilometers, driving more than 10,000 people from their homes and sending more than 1,000 to hospital with breathing difficulties. Ten factories had to be closed, 90 hectares of paddy fields were ruined and fish farms were destroyed.
The mess typifies the problems Indonesia faces not only with the structure of its political landscape but with continuing environmental devastation. It is a story of professional and managerial incompetence, undue haste to exploit natural resources at any cost, the malign influence of top government officials, the passivity of the courts and the eagerness of the global trading system to take whatever it can get from Indonesia without any regard for the consequences.

In particular, the case reflects badly on the reform government of President Susilo Bambang Yudhoyono, who took office with a landslide victory in 2004, vowing to clean up not only Indonesia’s legendary corruption but to do something about an environmental disaster that, among other things, is expected to cut Indonesia’s vast forests to 10% of their original area.

Lapindo officials first claimed that an earthquake had caused the blowout. However, so far six suspects have been indicted in the mudflow disaster, all employees of Lapindo and PT Medici Citra Nusa, the subcontractor that drilled the well. They face up to 10 years in prison but whether the employers of the six will ever face charges is another question entirely.

To start with, PT Lapindo Brantas is controlled by Aburizal Bakrie, a top government official, currently serving as Coordinating Minister for People’s Welfare. Bakrie is a member of one of Indonesia’s richest families, having recovered, with considerable government help, from running up more than US$1 billion in debts during the Asian financial crisis of 1997-1998. The family has interests ranging from rubber and palm oil to banking, insurance, petrochemicals, mining and telecommunications.

Despite the glare of publicity surrounding the case there has been no credible effort to put the heat on Bakrie, Lapindo or the other shareholders, PT Energi Mega Persada, PT Medco Energi, and the Australian gas company Santos.

Chief Justice Bagir Manan, for instance, has stated there is no need to hunt down “suspects” in the case. Energy and Mineral Resources Minister Purnomo Yusgiantoro, who heads up the team authorized to tackle the disaster, has already said the government would not "interfere".

A coalition of NGOs has demanded that the government prosecute Lapindo under the country's environmental laws, alleging that the government and the companies concerned violated the environment law and the criminal code in handling the disaster. Lapindo's management has been blamed for allegedly failing to install protective casing at the required depth during the drilling process.

Counting the Cost

Vice President Jusuf Kalla, after publicly demanding that the Bakrie family bear all the costs arising from the mudflow, since suggested that the government would share some of the costs. However, Bakrie finally clarified that the companies involved - not the government - would foot the bill, which could reach a whopping US$133 million according to the company. Medco, with a 32 per cent stake in the field, could pay up to $23.2 million and Santos, with an 18 per cent share, has set aside $19 million. Santos appears to have discounted the possibility of being brought to account. "The three key things we are focusing on - and which remain unresolved - are helping those people who are displaced, stopping the mud from coming out of the well, and dealing with the environmental consequences of the mud that has already vented,” says their spokesman Chris Bennett.

Yet the US$133 million cost is only effectively to contain the flow, which continues to spew out a torrent of hot mud and threaten an even worse disaster with the approach of the rainy season. A five-meter dyke to wall off the mud must be increased to seven to eight meters, officials say, before channeling the mudflow into the sea after treatment, raising fears over the marine ecosystem.

Lapindo has reportedly spent $20 million to compensate residents in the affected areas but Greenomics Indonesia executive director Elfian Effendi says Lapindo would go bankrupt if it were held responsible for all losses. The conservation group estimates the mudflow will cause total material losses of at least Rp33.27 trillion ($3.65 billion). The group said immediate losses included social costs and mud clearing costs of Rp7.96 trillion, while ecological damage amounted to Rp4.63 trillion.

There are at least some indications that the Bakries are starting to run scared. On Friday it was announced that PT Energi Mega Persada would sell all its shares in wholly-owned Hong Kong units Kalila Ltd and Pan Asia Enterprises Ltd, which together own 100 percent of Lapindo Brantas, to Lyte Ltd., another unit of the Bakrie group that already controls Energi Mega Persada. The move is probably motivated by the possibility of corporate lawsuits that could hold company executives responsible for the mess and not just lower-level employees. By moving the company from one unit to another, certain names would be off the company docket before any lawsuits are filed.

Another major cost will be land rehabilitation, with around Rp3.97 trillion needed to restore productivity to the soil. Also listed were economic losses for individuals, cooperatives, companies, government institutions and other related parties Losses attributed to the regional economy are estimated at Rp4.34 trillion.
Greenomics said economic and business restoration costs could reach Rp5.79 trillion. Lost business opportunities were put at Rp2.88 trillion, while the climate of business uncertainty was estimated to have cost Rp3.7 trillion.

Oil and gas firm PT Energi Mega Persada will sell all its shares in wholly-owned Hong Kong units Kalila Ltd and Pan Asia Enterprises Ltd, which together own 100 pct of Lapindo Brantas Inc, to Bakrie Group unit Lyte Ltd for 2.00 usd, Energi Mega said.

Laying the blame

Former Environment Minister Sonny Keraf, now deputy head of the House of Representatives commission overseeing environmental issues, criticizes the “weak leadership in managing disasters.” Noting that there was virtually no effective communication with the community, Keraf pointed to the possibility of a “conspiracy" between the government, Lapindo and the upstream oil and gas regulatory agency BP Migas to cover up the true causes of the catastrophe. He charged that the "company had not taken any honorable action" in assuming responsibility for the situation.

The delay in acting over the Bakrie mud flow and the soft line approach in assigning blame for the disaster contrasts starkly with the treatment meted out to the Indonesian subsidiary of US-based Newmont, the world's biggest gold producer.

In Manado, some 2,200 kilometers northeast of Jakarta, the local unit's president director, Richard Ness, is in the dock on charges of dumping dangerous levels of mercury and arsenic-laced waste into the sea. This is the first ever pollution case against a major mining company, although several studies by experts have come up with no real evidence of pollution in the area.

In February the government signed a goodwill agreement with Newmont for US$30 million, effectively ending the civil suit. The agreement, however, does not affect the ongoing criminal case against Ness and he still faces a 10-year prison sentence and a US$68,000 fine if convicted.

When he was chief economics minister, Bakrie himself dismissed any thought that perhaps the Newmont criminal trial would harm Indonesia's chances of attracting foreign investment. "We will not interfere in the criminal case. If they are proven to be doing something against the law, they have to face criminal action," he told reporters.

Companies close to President Suharto were virtually untouchable during his rule but democratic governance has changed that to some extent. Nonetheless family conglomerates like the Bakries and other politically-connected business groups continue to benefit from government policies and projects. Although justice for the Lapindo villagers, at least in terms of decent financial compensation, seems almost certain now, Bakrie faces little risk of being held accountable. Should the case ever go to court, it is unlikely that the wealthy and powerful will be among the accused.

But aside from the economic, environmental, and social losses of the Sidarajo disaster, there could still be political costs for Bakrie and perhaps even the government. The disaster drags Bakrie's role in the administration, with its inherent conflict of interest, firmly back into the spotlight. In December he was moved sideways from coordinating minister for economic affairs to the powerful welfare coordinating post, seemingly because his private business dealings were raising hackles. Indonesia has no regulations on how officials should regulate or divest their business interests while in office yet the president’s decision to keep Bakrie in the cabinet at all was widely interpreted as a major concession to the Golkar Party, led by Kalla.

Some claim the criminal investigations into Lapindo executives and other contractors could simply be a smokescreen to dampen anti-government sentiment. Chances that Bakrie will be sacrificed on the altar of environmental accountability are extremely remote. With his big business hat on, the critics say, he can easily use his position to funnel major development projects to his business friends and his cronies in Golkar, the biggest party in parliament, controlling 23% of seats while Yudhoyono’s Democrat Party holds a mere 10%.

And after all, as the Chief Justice said, "it’s more important to compensate those affected for their losses. After that, the case will be closed, and there is no need to look for suspects." His pronouncement could impact not only on police conducting the investigation, and also on judges and state attorneys but perhaps even on the foreign shareholders.
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#29047 - 24 Sep 06 00:07 Re: Asia Sentinel/Indonesia’s gusher of gas, mud and graft
Dilli Offline
Pujangga Besar

Registered: 26 Feb 06
Posts: 8044
Loc: Nearest Bar
I have insider information!
Menace to Sobriety

#29048 - 24 Sep 06 19:40 Re: Asia Sentinel/Indonesia’s gusher of gas, mud and graft
KuKuKaChu Moderator Offline
Pooh Bah

Registered: 09 Oct 05
Posts: 10790
Loc: Centre of the Universe
then spill it out ... so to speak.
KuKuKaChu: dangerously too sophisticated

#29049 - 24 Sep 06 20:57 Re: Asia Sentinel/Indonesia’s gusher of gas, mud and graft
Dilli Offline
Pujangga Besar

Registered: 26 Feb 06
Posts: 8044
Loc: Nearest Bar
Sorry, my publishers have demanded I keep sctoom until the book is launched! (It worked for the Pakistani Prime Minister - ?)
Menace to Sobriety

#29050 - 25 Sep 06 18:04 Re: Asia Sentinel/Indonesia’s gusher of gas, mud and graft
KuKuKaChu Moderator Offline
Pooh Bah

Registered: 09 Oct 05
Posts: 10790
Loc: Centre of the Universe
how do you say "you're full of shit" in urdu?
KuKuKaChu: dangerously too sophisticated

#29051 - 25 Sep 06 19:12 Re: Asia Sentinel/Indonesia’s gusher of gas, mud and graft
Dilli Offline
Pujangga Besar

Registered: 26 Feb 06
Posts: 8044
Loc: Nearest Bar
Gandoo Bukri Chod!
Menace to Sobriety


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