Papua killing incident put investment, LNG negotiation at risk
Monday, September 2 2002 - 03:22 AM WIB
Mining investors had been pulling away from Indonesia since the beginning of economic and political crises in 1998, avoiding the risk of political uncertainties. Investors felt that their investment ware not adequately protected. Mining investors faced even bigger uncertainties with implementation of regional autonomy, which gave excessive authority to incompetent regional governments. To make the matter worse, ministry of forestry banned open pit mining in protected forests, making most of exploration activities in Indonesia stopped or at lest significantly slowed down.
?The shooting incident will surely affect Indonesian mining investment climate in a negative way unless, security apparatus act swiftly and thoroughly investigate the case. Those who are found guilty must be brought to justice,? said Wimpy S. Tjetjep, Director General of Geology and Mineral Resources at the ministry of Energy and Mineral Resources.
Jeffrey Muljono, the secretary general of Association of Indonesian Coal Miners agrees with Wimpy. ?Unless the government and security apparatus could quickly solve the case, mining investors will shy away from Indonesia. Therefore I urged the government to guarantee safety of investors? investment, including the safety of personnel working in the projects.?
The shooting incident not just has impact on mining investment, but may also negatively affecting Indonesia?s effort to market liquefied natural gas (LNG) from giant Tangguh gas fields, which is operated by BP, to China?s province of Fujian.
?China must be very concerned about the incident. I think it might seriously affect Indonesia?s position on LNG supply negotiation, because they are very concerned about the security of supply,? said an industry source who is involved in negotiation.
Tangguh had failed to win tender to supply 3.5 million tons of LNG per year to the China province of Guangdong. Analysts said one of the most critical factors in Tangguh?s failure to win the tender is the security concern in the restive province of Papua.
The contract was given to Australia LNG, which will supply LNG from the NorthWest Shelf, while Tangguh was given consolation to supply more or less the same amount of LNG to Fujian province starting 2007. But terms and condition of the Fujian LNG supply was far from clear, as both parties have to start to negotiate from early stage, and no definitive decision has been made by Fujan province that Tangguh would be appointed sole supplier.
?The main factor that the Chinese pick Australia over Tangguh is because they are worried about security condition in Papua. And now it seems that their concern had been proven right, even though the incident happened some 500 kilometers away from Tangguh,? an industry analyst told Petromindo.Com.
The analyst said that the incident might affect the course of LNG negotiation.
?The worst impact could be that Fujian called off the deal. Even if they don?t it would definitely affecting Indonesia?s bargaining power position,? the analyst said.
The analyst went on to say that the preference given to Tangguh as sole supplier could be withdrawn anytime since there is no binding agreement signed.
BP official when contacted was not available for comment.
Papua had been in turmoil as some elements in the population demand separation from the Republic of Indonesia and formed armed movement to press for their demand. To make the matter worse, the Indonesian armed forces is also suspected to be deeply involved in power play in the province.
There are unconfirmed reports that the army is trying to extort money from mining and gas project in return for protection. The report said separatist movement in Papua province are ill equipped and untrained and there is no way that they could orchestrate an organized attacks without the help of an outside organization. (godang/alex)