Giant LNG project to be test case for new law

The development of massive natural gas fields in the remote Indonesian province of Irian Jaya will be a test-case for a new law which gives local people a legal voice in every proposed development project, a minister said Thursday.

Environment minister Sonny Keraf, in a speech read by his deputy Ali Jumardi, told a three-day international energy conference here that the law on community participation in environmental impact assessments would come into effect on November 7.

Keraf said the law would give local populations "the legal right to get involved in the decision-making process of every proposed project or development in their area."

"The pilot project for the implementation of the decree is the development of the LNG (liquefied natural gas) Tangguh field in Irian Jaya," he said.

Representatives from British Petroleum (BP) told the conference earlier that Tangguh contains an estimated 20 trillion cubic feet of natural gas. BP plans to start pumping gas from Tangguh in 2005 at a cost of two billion dollars.

The law will in be place two months ahead of a formal devolution of power to Indonesia's 27 provincial governments. New regional autonomy laws come into effect on January 21.

Deputy minister Jumardi said the facilitation of dialogue between developers and local people would be in the hands of local governments via environmental impact agencies, which operate at regional and district levels.

However he said the arbitration of any disputes that may arise would be the responsibility of "a new mechanism," the establishment of which the Indonesian parliament has already approved.

"If there is some dispute, we also have another government regulation. It is a new one, regarding to the alternative dispute resolution," he said.

Asked if he anticipated difficult disputes between local people and developers, he replied: "We hope not but if that happens, we also have a mechanism to resolve that."

Jumardi said the new choice about to be given to local people was unprecedented in Indonesia.

"The process is not something that usually took place in the past - just a survey or a study or something. What we want is to have is a dialogue with the proponents of the activities."

"So in this case, the investors should have a meeting with local people," he said, adding that the new law should prevent unnecessary conflicts and hostilities and make it easier to recruit local employees.

A management consultant advising foreign investors in South East Asia, who preferred to remain anonymous, welcomed the law as a "positive move" that brought Indonesia into line with most other countries.

But the consultant said investors needed to be wary of the proposed arbitration agency mechanism.

"It depends whether it's given the arms and the legs to really be effective, otherwise it will be useless, and just another barricade for developers.

We also have to see how mature it can be as a fair moderator," he said.

He added that similar arbitration bodies, for example in Vietnam, were incompetent and incapable of fair meditation and "a real headache to investors."

Ariffi Nawawi, director for processing from the state oil company Pertamina, suggested that the talks could result in companies helping the local community - for example "building a mosque or a church or a road."

Irian Jaya has for years been the scene of constant tension between the local population and one of the world's biggest gold and copper producers, Freeport Indonesia. (*)