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Cablegate: Exxonmobil's Cepu Project: Local Population Perspective More

VZCZCXRO9753
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJS #0101/01 2990826
ZNR UUUUU ZZH
R 260826Z OCT 09
FM AMCONSUL SURABAYA
TO RUEHC/SECSTATE WASHDC 0482
RUEHJA/AMEMBASSY JAKARTA 0471
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RHHMUNA/HQ USPACOM HONOLULU HI
RUEHBJ/AMEMBASSY BEIJING 0011
RUEHWL/AMEMBASSY WELLINGTON 0184
RUEHBY/AMEMBASSY CANBERRA 0217
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEHJS/AMCONSUL SURABAYA 0494

UNCLAS SECTION 01 OF 02 SURABAYA 000101

SENSITIVE
SIPDIS

DEPT FOR EAP/MTS, EB/ESC/IEC
DOE FOR CUTLER/PO-32 AND NAKANO/P-42
COMMERCE FOR USDOC 4430

E.O. 12958: N/A
TAGS: EPET ECON EINV PGOV PREL ID
SUBJECT: EXXONMOBIL'S CEPU PROJECT: LOCAL POPULATION PERSPECTIVE MORE
POSITIVE THAN MEDIA PORTRAYAL

REF: JAKARTA 1678

SURABAYA 00000101 001.2 OF 002


This message is sensitive but unclassified. Please protect
accordingly.

1. (SBU) Summary: ExxonMobil's operation of the Cepu oil field
has come under harsh media criticism for failure to meet
production targets and the expectations of the local population.
The situation on the ground, however, paints a different
picture. While eager to see more economic impact from the
project in their communities, the local populace is generally
satisfied with ExxonMobil's community development efforts and
uneasy about how political bickering is slowing the project.
Local activists complain that ExxonMobil talks directly to
village leaders rather than to the activists to determine
development priorities. The Regent suggests that ExxonMobil
should provide what the population needs -- as determined by the
Regency -- rather than what they want -- as determined by the
villagers themselves. None believe that transferring operations
to national oil company Pertamina would be a positive
development. End Summary.

Expectations and Realities
---------------------------------

2. (SBU) Operations at the Cepu oil field, straddling the border
between East and Central Java, have become a source of
contention between ExxonMobil and the Indonesian government.
The company's difficulties acquiring land and permits slowed
construction of the early processing facilities that are
necessary to begin shipping oil. BP MIGAS Chairman R. Piryono
recently made public statements vowing to revoke ExxonMobil's
contract if Cepu was unable to produce 15,000 barrels/day (bpd)
by the end of September. ExxonMobil is currently producing
12,000 bpd, but are still constructing the facility that will
allow the company to process 40,000 bpd. Further complicating
matters, BP MIGAS has not yet approved the
engineering/infrastructure projects that would allow Cepu to go
to full production up to 160,000 bpd. Even if the project were
approved tomorrow, ExxonMobil says there is no technical way to
get to full production before 2013.

3. (SBU) The media has strongly criticized ExxonMobil and its
Cepu operating company, Mobil Cepu Ltd (MCL), for failing to
meet production targets and improve economic conditions in the
local communities. A number of prominent voices have in turn
demanded that national oil company Pertamina take over
operations at Cepu. On October 19-20, ConGen Surabaya travelled
to Cepu and surrounding communities to get a better
understanding of the situation on the ground and the sentiments
of local leaders and average citizens. Regency-level officials,
village leaders, and local citizens expressed general
satisfaction with MCL's operations and community development
activities. While all looked forward to reaping the economic
benefits of MCL's operations, each had different expectations of
what form those benefits should take.

Pre-Schools and Employment, To Start
--------------------------------------------- ---

4. (SBU) MCL's operations and community development projects are
evident in the villages immediately surrounding the facility.
Pertamina prohibited MCL officials from meeting with Surabaya's
PO, but representatives of IRE, a Yogyakarta-based NGO, offered
a tour of village-level projects. IRE works with MCL to
facilitate communication with local communities, build community
partnerships, and assist in development planning. The IRE rep
said that MCL was focused on three areas: health, education, and
economic development. He added that in contrast to the "elites"
who wanted MCL to build large projects so that they could get
their pictures taken at lavish opening ceremonies, villages have
different priorities. The IRE rep observed that villagers never
expect anything from the government or large companies, so are
pleasantly surprised that MCL is following through on its
promises, albeit slowly.

5. (SBU) The head of a village located within site of the Cepu
gas flare said villagers were generally happy with MCL's
efforts, thus far. He noted that MCL has hired villagers as
security guards and laborers, which was bringing money into the

SURABAYA 00000101 002.2 OF 002


village, adding that MCL was careful to hire equal numbers of
employees from multiple nearby villages so as to avoid
jealousies. Other villagers have started small businesses, such
as shops and food stalls, to support the facility's operations.
The village head explained that MCL and IRE were careful to
discuss all development plans with village leaders and engage
them on priorities. All development projects are cooperative
efforts between MCL, IRE, and local governments. At the village
heads' request, MCL built pre-schools in 18 villages and was now
working to improve road conditions. Much still remains to be
done and progress was never as fast as anyone would like.
Teachers at the schools are unpaid volunteers and education
materials are limited.

Who Decides on Priorities?
---------------------------------

6. (SBU) Self-described village "activists" were more critical
of MCL's efforts to date, in particular MCL's limited authority
to implement projects and programs without approval from Jakarta
or BP MIGAS. They praised ExxonMobil's high standard on Safety
and Security issues and environmental concerns, but complained
that ExxonMobil's definition of "local" hiring was too broad,
and should be limited to people living in core villages near the
facility itself. An MCL employee at the meeting was hired from
the regency's largest town, Bojonegoro, but the activists didn't
consider him "local." They also complained that MCL's
development programs did not reflect the activists' priorities.
For example, the activists argued that paving village roads
should be the first priority, but MCL provided clean water
projects instead. The activists added that MCL should consult
more with the activists themselves rather than village officials
directly because the activists understood what the villagers
really needed.

7. (SBU) The Regent of Bojonegoro, Drs H. Suyoto, suggested that
MCL should look to the regency's development plan to determine
what the villagers "need" rather than what they "want." He
praised Petrochina for including local government plans in its
community development strategy (CDS), suggesting that ExxonMobil
was conditioned by the Sukarno era to believe that government
didn't speak for the people. He did not elaborate on what form
Petrochina's CDS took. Suyoto observed that it did not matter
to the regency who operated the field, so long as it was
operated well since Bojonegoro had a 4.6% stake in the operation
through its BUMD (Regional Government Owned Enterprise).

8. (SBU) Suyoto said he had to continually remind the population
that oil is just one element of Bojonegoro's economy, and would
not provide sufficient revenues or employment for the entire
population. He explained that the Regency would receive only 6%
of the project's total revenue. If that total were distributed
equally to each resident, each person would only receive
approximately Rp 2 million (200 USD). It was better, Suyoto
argued, for the Regency to invest in infrastructure, education,
and health and to encourage entrepreneurship to improve the
quality of life and build the economy for the long term.
MCCLELLAND

© Scoop Media

 
 
 
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