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Thefts may force foreign oil firms to leave Indonesia

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Associated Press - June 4, 2001

Duri – It is a costly cat-and-mouse game played out daily by guards, the workers who install oil-exploration equipment and the thieves who scavenge its metal for scrap.

"We install it, they steal it," moaned Mr Akson Brahmantyo, an engineer at Indonesia's largest oilfield operated by the US energy company Caltex.

On this palm-fringed plain in Riau province, about 1,000 km north-west of Jakarta, Caltex wells produce half of Indonesia's daily output of 1.4 million barrels of oil, extending a lifeline to an economy that is being dragged down by political and social disarray.

Dozens of workers labour beneath the scorching sun, wrapping protective aluminium sheets around hundreds of kilometres of pipes that inject super-hot steam deep into the earth to force oil to the surface. By night scavengers tear off the aluminium to sell for scrap. The steam then cools and the ejection process fails.

The pilfering does not stop there. Villagers and criminal gangs carry off anything of value. Electric wire, valves, control panels and other equipment vital for the oilfields disappear daily. Caltex estimates that direct theft is costing it more than US$1 million a month and US$400 million a year in production stoppages.

Another US energy giant, Exxon-Mobil, shut down natural gas production in Aceh province in March because of fighting between troops and separatist rebels. That halted exports of liquefied natural gas worth US$100 million a month.

Elsewhere in the 5,000-km-long Indonesian archipelago, Denver-based Newmont Mining Corporation and other mining companies have scaled back operations because of growing labour problems, worsening community relations and demands by local officials for more kickbacks.

So the last thing Indonesia needs is a massive flight of foreign investment. That does not seem to have happened yet, but one foreign mining executive, speaking on condition of anonymity, said his company is thinking of relocating to Iran.

Foreign companies are not the only ones struggling with lawlessness. The state-owned PLN electricity monopoly had to abandon a 190-km power line connecting the western side of Sumatra island to the grid. All the cables were stolen off the pylons before the project was completed. Police reported 93 demonstrations, labour strikes and other disruptions in the Duri area last year, compared with 42 the previous year.

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