September 7, 2000
Page One Feature
Mobil Sees Its Gas Plant Become
Rallying Point for Indonesian Rebels
By JAY SOLOMON
Staff Reporter of THE WALL STREET JOURNAL
LHOKSEUMAWE, Indonesia -- A small plane circles to land at the massive
Arun gas facility on the northern tip of Sumatra island. Below, pipelines
shimmer in the tropical sun. "It's a beautiful sight," says an executive
from Mobil Oil Indonesia Inc., looking out the window.
Suddenly, gunfire breaks out on the ground, followed by a few
rocket-propelled grenades. The Indonesian military is skirmishing again
with the Free Aceh Movement, which is waging a guerrilla war for
independence for Aceh Province. The plane's radio crackles: "Get out of
the area!"
The gas field here is so big that in the early 1990s it produced nearly a
quarter of Mobil's global revenue before the company merged into Exxon
Mobil Corp. Today the facility is caught in the middle of a bloody
secessionist conflict. In May, armed assailants held eight Mobil workers
hostage for an afternoon and threatened to blow up a well, before
releasing them unharmed. In recent months, two of Mobil's private
security guards have been killed. Two other employees were shot and
wounded in March. The fighting in nearby villages between the guerrillas
and Indonesian soldiers has driven several thousand Acehnese into
makeshift refugee camps among Mobil's wellheads.
Good Works and Resentment
Like most major investors in developing countries, Mobil has sought good
relations with the locals by creating jobs and contributing toward
schools, roads and other projects. But the company remains a target of
violence and deep resentment because of its association with the Jakarta
government. Secessionist pressures are mounting in Aceh (pronounced
Ah-CHAY) and elsewhere, even as many Indonesians look for justice in the
trial that just began of former President Suharto, who is charged with
illegally diverting nearly $600 million from state charities into the
businesses of his children and cronies -- charges his lawyers deny.
Indonesians are also angry at their former leader for a string of
lucrative deals signed with foreign investors. Mobil's contract is
typical. Most of the revenue from it goes directly to Jakarta without any
benefit to Aceh, although proposed legislation would amend this. And the
same military accused of atrocities against the rebel movement and local
population provides Mobil with security services. Some locals say the
troops even use a perceived threat against the U.S. company to go after
rebels.
Mobil says it doesn't know who is responsible for the violence. "Despite
the difficulties experienced by our employees, we're trying to move ahead
with our work," says Ron Wilson, who heads Mobil's operations in
Indonesia. "We don't get involved in the politics, but we, of course, are
highly concerned with the violence."
To the guerrillas and many Acehnese, Mobil and its production contract
represent Indonesian politics at its worst. During his 32-year rule, Mr.
Suharto's government granted many natural-resource contracts to
multinationals, such as Mobil, Caltex and Freeport-McMoRan Copper & Gold
Inc., in which almost all revenue flowed straight back to Jakarta --
bypassing local governments and sustaining Mr. Suharto's military-backed
regime.
In 1998, a popular uprising swept Mr. Suharto from power, unleashing a
wave of separatist sentiment across Indonesia's 17,000 islands. The West
is familiar mainly with East Timor's long struggle for independence, and
that conflict continues to claim victims: Wednesday, pro-Indonesian
rioters killed three United Nations refugee workers in West Timor. But one
of the prime targets of the new rebels has also been these old business
contracts.
On the island of Sulawesi, where Colorado-based Newmont Mining Corp.
operates a gold mine, a local regent recast Newmont's tax agreement with
the central government to steer more money into local coffers. Then he
sued Newmont this year to enforce the changes. The case was settled when
Newmont paid about $500,000 in disputed taxes.
In Riau province, Caltex -- a joint venture between Chevron Corp. and
Texaco Inc. -- is being pressured to transfer management of a major oil
field to the local government. The order to do so came from none other
than Indonesia's current president, Abdurrahman Wahid, in the face of a
well-organized local campaign demanding greater autonomy, if not outright
independence, for Riau. Tribal groups in Indonesia's easternmost province
of West Papua, where Louisiana-based Freeport-McMoRan mines the world's
largest copper and gold deposit, are demanding that contract be reworked.
These conflicts not only have a bearing on future foreign investment in
Indonesia; they also fuel growing concern in the government over how long
Jakarta can hold together this far-flung and populous nation. At the heart
of that concern is Aceh's secessionist drive and whether it could spark
the disintegration of the world's fourth-largest nation.
One of Indonesia's richest provinces, Aceh produces roughly a third of the
country's liquefied natural gas, as well as substantial amounts of oil,
timber and minerals. In 1999, the Arun gas fields produced two billion
cubic meters of natural gas daily, making it one of the region's major
suppliers.
"Resource allocation is among the most important issues facing Indonesia
today, as the provinces' demands have to be balanced with Jakarta's
financial needs," says Rizal Ramli, Indonesia's chief economics minister.
Oil and gas revenue alone will make up 30% of the country's total revenue
this year.
Mosques and Roadblocks
Aceh province is, like most of Sumatra, lush and underdeveloped. Small
villages made up of wooden huts and mosques are linked by narrow
meandering roads and a fervent adherence to the Muslim faith. But on these
same roads, military trucks carrying Indonesian troops and the regular
interruptions of roadblocks offer reminders of the continuing battle for
control of the province.
Aceh endured a brutal operation by Indonesian forces throughout much of
the 1990s, leaving thousands of citizens dead in a campaign to wipe out
separatist sentiment, according to human-rights groups. The Free Aceh
Movement, known as GAM, is seeking to make the province a Muslim state.
Renewed hostilities during the past year between GAM and the military have
left at least 500 soldiers and civilians dead, according to the armed
forces.
Mobil came to Arun in 1971 as part of Mr. Suharto's campaign to fortify an
Indonesian economy damaged by mismanagement and by the 1960s bloodshed
that elevated the former general to power. His strategy: exploit
Indonesia's natural bounty in oil, lumber, gold and natural gas. Indonesia
quickly became the world's largest exporter of liquefied natural gas, a
position it retains today. During the past decade, Indonesian exports of
natural gas have garnered more than $40 billion in revenue for Jakarta.
Arun and other projects provided jobs, strengthened Mr. Suharto's grip on
power, and kick-started the economy's 30-year drive toward modernity.
Jewel in Corporate Crown
Mobil won't comment on how much money it has earned from Arun. But Lance
Johnson, ExxonMobil Production Co.'s vice president for Southeast
Asia/Australia, says the facility was for a time "the jewel in the
company's crown." Here in the coastal town of Lhokseumawe, Mr. Suharto's
youngest son and others built petrochemical complexes, entrepreneurs
developed supply industries, and Mobil helped locals construct schools,
water systems, roads and health facilities.
Mobil also built a luxurious housing compound for its expatriate staff.
Called Bukit Indah, today it is home to 20 engineers and managers who
inhabit a surreal cocoon. Behind walls and guard posts and nestled on tidy
lawns stands a cluster of villas that might look at home in Palm Springs.
There's an 18-hole golf course nearby, two Western-style food markets, and
an international school, although all the expatriate children were
evacuated last fall due to the violence. Perched on a bluff, the villas
overlook the fiery flares and white storage tanks of Arun's refining
operations and the dusty shops and government offices of Lhokseumawe.
One evening recently, a senior Exxon Mobil official watches a rerun of
this year's National Basketball Association playoffs in a cozy living room
in Bukit Indah. The cheers of Los Angeles Lakers fans from his TV mingle
with the rat-tat-tat of machine-gun fire outside the window; the
Indonesian military is conducting another sweep of GAM in nearby villages.
"This could go on all night," the executive says.
Military's Dual Role
The military has a dual role around Arun that exacerbates Mobil's image
problem with locals. Mobil's contract obliges it to rely on the Indonesian
military for on-site security -- the same military that has been
implicated in a string of high-profile human-rights abuses in its
decade-long campaign against GAM. For the 10 years starting in 1989,
troops have killed more than 1,000 civilians in the crackdown, according
to a Human Rights Watch report. "Many women whose husbands or sons were
suspected of involvement with the guerrillas were raped," the report says.
Earlier this year, an Acehnese court convicted 24 soldiers of massacring
57 villagers in an Islamic boarding school last year. On May 3, 1999,
according to Amnesty International, troops killed 38 Acehnese "as they
took part in a demonstration against military violence." A military
spokesman in Aceh confirms the incident, but says the troops fired in
self-defense.
One result of the bloodshed is a refugee crisis on Mobil's land. In late
July, about 3,000 refugees from nearby villages were living in camps in
and around Mobil facilities. Women in Muslim headscarves cooked vegetables
in the shadow of gas lines. Children used pumps as a jungle gym. The
refugees expressed an intense hatred not only of the armed forces, but in
many cases of Mobil, too.
"Mobil is responsible for the Indonesian military being here," says Rusi
Samad. The 32-year-old farmer lived for a while in one of the many
makeshift tarp-and-bamboo huts that have sprouted among the pipes and
pressure controls. Mobil says many refugees in this area returned to their
villages recently. Mr. Samad believes the military uses a perceived threat
to the gas fields as justification for cracking down. "For us, the
presence of Mobil only gives the benefits to the military," he says.
Claims of Abuse
Some villagers claim they were physically abused by soldiers assigned to
Mobil duty, particularly by troops from A-13, a barracks across from a
Mobil gas well. One man, 24-year-old Iskandar (like many Indonesians, he
goes by one name), claims that three years ago he and seven friends were
at a food stall when A-13 troops picked them up, alleging they had robbed
a bank. The eight men were taken to the barracks, he says, where they were
kicked, tortured with electric shock and held overnight. Mr. Iskandar
lifts his shirt to reveal scars he says resulted from the torture.
While it's impossible to verify individual claims, human-rights and
legal-aid groups in Lhokseumawe say they have received numerous reports of
abuses by troops in and around Mobil facilities. People "suspected of
being GAM were brought and tortured" in A-13 and other sites, says Yusuf
Ismail Pase, a lawyer who helped lead a provincial fact-finding team
looking into military and GAM-related violence in Aceh.
Local police and the military say their sweeps are justified by GAM
provocations. A spokesman for the Indonesian armed forces, Graito Usodo,
says he hasn't heard any specific charges that troops at A-13 were
involved in abuses. He confirmed, though, that troops in the area had been
involved in "excesses," and that it was conceivable some may have occurred
at A-13 "and at other camps in the area."
Mobil Oil Indonesia says it isn't aware of any incidents of Mobil-assigned
troops harassing villagers. It also says it knows of no cases of people
being tortured in facilities used for Arun operations, and stresses that
the A-13 barracks is controlled by the Indonesian military, not Mobil. The
company adds that Arun is an Indonesian state asset and that, therefore,
the government "makes the decisions regarding the protection" of the
field. Mobil also notes that it has been providing food, water and
medicine to refugees.
The March 31 shooting of the two Mobil employees occurred when a gunman
stepped out of the jungle and opened fire on their Beechcraft as it was
taxiing after landing. Police blame GAM, while the guerrillas deny
involvement.
In the hostage-taking on May 27, six armed men broke into the command
center at Mobil's Pase A-1 gas field and seized eight engineers, demanding
the equivalent of $500,000 in ransom. After a four-hour standoff -- during
which the assailants allowed the engineers to keep working -- the incident
ended with the assailants slipping back into the jungle. Again, the police
blame the incident on GAM. The rebels deny involvement in the kidnapping
and take credit for rescuing the Mobil employees.
Mobil plays down the incident, saying it doubts that the assailants,
whoever they were, actually meant to kidnap the employees. But in this
atmosphere, the productive life of Arun could be shortened. The operation
has contracts that extend until 2018, but the field is facing depletion in
coming years and two of its six gas-production plants have been closed.
Further exploration could extend its life, but that would be difficult if
the current instability doesn't abate.
Hoping for the Best
A spokesman for Exxon Mobil says it is the parent company's understanding
"that any change in the provincial government arrangement would not
compromise or breach existing contractual agreements." Although the
company doesn't offer any contingency plans if such a breach occurs, it
clearly expects the jobs and public services it has brought to the region
to count strongly in its favor.
In recent weeks, the situation in Aceh has become bleaker. In early
August, Indonesia's Parliament surprised many Indonesians and human-rights
officials by passing a constitutional amendment that could shelter
military officers from trial for past human-rights abuses. And while Mr.
Wahid's government is seeking to extend a three-month-old cease-fire, the
period saw little easing of violence as more than 60 people were killed.
On a recent drizzly afternoon, a trip through the jungle to a guerrilla
camp is punctuated by stopovers at mosques and cafes, where GAM sentinels
inspect the travelers. At the isolated camp an hour's drive from Mobil's
gates, a GAM regional commander, Tengku Darwis Jeunieb, puts 40 recruits
through marching drills.
In Cmdr. Jeunieb's camp, many of the recruits are women, which isn't
unusual, he says, because Acehnese women have been "important to our fight
for independence" since the province took a leading role in the fight to
overthrow Dutch control. One of the trainees, 25-year-old Haswananda,
describes a firefight with Indonesian troops earlier this year. "They came
out of nowhere, and I started firing," she says, cradling an AK-47. "I
remember some of them went down."
A recruit named Rosmanidar describes how her grandfather was tortured in
the rice paddies by soldiers 10 years ago. "I've vowed to myself I'd take
revenge one day," the 20-year-old says, wearing military fatigues and a
green Muslim headscarf, and holding a grenade launcher.
Toward Mobil, however, Cmdr. Jeunieb and his troops don't express
vengefulness so much as dogged determination. They've never attacked the
plant, they say, despite their conviction that Mobil embodies Jakarta's
abuses here. The rebels don't plan to kick Mobil out of the province if
GAM gains control, but they'll change some things. Noting that revenue
from the gas fields would be key to developing the province, Cmdr. Jeunieb
says simply, "We'll renegotiate the contract."
-- Puspa Madani contributed to this article.
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