Not too many years ago, an earth quake off the coast of Sumatra and tsunamis in South Asia would have been, well, like from so far away. Not today. The unspeakable devastation has been visited upon peoples close enough to the heart to be Quillnews neighbors.
When Quillnews was an oil company soldier, I spent lots of work and travel time between 1990-95 in Aceh Province, on the northern tip of Indonesia’s western most island of Sumatra – the epicenter of recent events. My duties then were of the routine now called civil affairs – development of social infrastructure (schools, clinics, and cultural exchanges), professional training and government relations. These duties were occasioned by the discovery in 1972 of the Arun gas field -- totaling some 15 trillion cubic feet of gas – in the middle of, what was then, nowhere. The company’s wildcatters from Texas and Alberta had told state-side suits they were hunting oil; when gas – not oil – was found business managers wanted to abandon the resource. Only the savvy of the company’s ex-pat oil general, who hung out in Jakarta and Singapore, let’s call him Mr. Small, saved the day. He envisioned compressing the gas into a liquid, transporting it on ships to markets in Japan where it could decompressed into a natural gas form and be sold at a huge profit. This act of industrial-commercial imagination was a master stroke that would change the region. It earned Mr. Small a promotion state-side and subsequent early retirement when the change of venue proved not to agree.
As a result of the discovery, the company's local subsidiary, which had signed a production sharing agreement with Pertamina, Indonesia’s state petroleum enterprise, would grow from 7 employees in 1967 to more than 1,500 at one point; 95% of whom were Indonesian. In addition, the PT Arun LNG plant was built in Aceh – with the company’s help -- by Pertamina, in which several more thousand Acehenese were employed.
It happened this industrial development, employment and wealth creation in Aceh was happening in the remotest and western-most province in the Indonesian federation, inhabited by an independent minded, pious and cranky ethnic group who did not like outsiders – particularly the Javanese who ruled Indonesia from Jakarta, the nation’s capital, on the island of Java.
When Quillnews worked in those parts, the Arun field had been developed with up to 82 production wells in seven collection clusters, and producing 2.2 billion cubic feet of gas, 118,000 barrels of liquid condensate, and 8,450 cubic meters of liquefied petroleum gas each day. This field supplied 25% of the entire LNG market in the Pacific, represented half of the gas exported by Indonesia and was an essential energy source to Japan, the economic engine of East Asia, and to Korea. In contrast, recent production tallies from the Arun and satellite fields in Pase/South Lhok Sukon and the North Sumatra Offshore field totaled 745 million cubic feet of gas per day. A narrative of the corporate consequenses of this decline and those days is here.
The industrial linkages made possible from the Indonesian discovery, the incredible petroleum wealth created for Indonesian development, and the creation of the LNG trade now are the cornerstone to trade links that are cementing the growth of Asia with the creation of Qatar’s North Field, the most significant petroleum field in the Middle East. The fact that the gas field is located in Qatar for markets in Asia just as both regions were set to brew as cauldrons of humanity is a Providential benefit as it gives everyone an alternative to Saudi energy supplies from a comparatively enlightened Persian Gulf state.
But the development in Aceh also exacerbated an indigenous rebel movement, which not only has a local insurgent flavor with deadly consequences, it also became embroiled in the fundamentalist movement underway in Islamic world, and exploited by Al-Qaeda wannabes, and who make first world terror-fighters extremely anxious. The company continues to react, as it did in August 2002, to accusations in its correct corporate litigation mode to law suits brought on behalf of the war’s victims. The government in Jakarta denies all. The WSJ earlier this month made sure the world noted the stakes with the Osama-style gangsters in Indonesia, and warned the Indonesian government that its kneejerk reaction of denial in the traditional Javanese style just was not on! A typical treatment of the matter from the MSM’s Time magazine last June reported the MSM view to outsiders. Tourist essays about Aceh warn of trouble. Aceh remains remote.
Despite these problems, the Indonesian LNG trade is also being touted by advocates of economic development as a model for others – as the way countries with remote gas resources can exploit their resources. Russia has vast gas in Siberian and frozen tundra to the north, a potential LNG resource. Fuel sources from smaller gas discoveries in the South China Sea and coastal Brazil as LNG could give the world alternatives to Middle East petroleum – just as the world needs it. A contemporary exec from the company touted Indonesia’s importance during a recent visit.
Still, the obscene tape from Osama, released as the earthquake’s misery spreads, in which he praises murders in Iraq insults the intelligence and humanity of the world. This guy is truly evil. And today’s news is grim. Though local company spokesman report damage to production facilities outside the town of Lhokseumawe was slight, 4,000 lives were lost in town. Even the rebels in Aceh called a cease fire. Damage to the facilities was light. Markets remain calm, for now. The world today is a small neighborhood.
Stay tuned...