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BP Indonesia plans under fire

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Wall Street Journal - December 10, 2004

Timothy Mapes, Jakarta – BP PLC's plans to invest about $5 billion in a natural-gas project in Indonesia's remote eastern region are coming under fire from human-rights groups, which charge that the company isn't living up to promises to make it a model for investing in the developing world.

The project, known as Tangguh, is the largest new foreign investment planned in Indonesia, which has struggled for years to attract investors because of a reputation for political uncertainty and lawlessness. BP wants to build a liquefied-natural-gas facility in a remote area on the Indonesian half of the island of New Guinea, from where it will export gas to customers signed up in China, South Korea and the US, among other places.

Environmental and human-rights groups have long been concerned about the project, largely because it is in the Papua province, the scene of violent conflicts between Indonesia's military and separatist groups for many years.

Independent analysts worry that the plant – and the revenue it will generate for local authorities – could become a flashpoint for more violence in the area.

There has been violence near an LNG plant run by Exxon Mobil Corp. in Aceh, another restive part of Indonesia.

BP has attempted to ease concerns by proclaiming that it wants Tangguh to set a new standard for investment in the developing world, and emphasizing its commitment to protecting the environment and human rights in every aspect of the project. "Tangguh aspires to be a 'model project' for social empowerment and sustainable development in Papua," BP says on its corporate Web site.

Now, though, at least one executive who formerly worked on the project is having doubts. John O'Reilly, a former BP senior vice president who worked on Tangguh for four years before he retired in April 2003, contends that BP seems to be backing away from promises it made to community leaders to speak out in defense of human rights in the area.

"BP needs to get its act together on these social issues, just the way it does on the technical and commercial side of the project," Mr. O'Reilly said in a telephone interview. Mr. O'Reilly oversaw community relations and other social aspects of the Tangguh project for BP.

In a letter to BP Chief Executive John Browne sent Wednesday, Mr. O'Reilly and some human-rights activists in Papua urged the company to delay a formal decision to move ahead with the project until their human-rights concerns are addressed. Other signatories included Elsham, a major human rights group in Papua, and the London-based Indonesia Human Rights Campaign.

A BP spokesman in Jakarta said the company is reviewing the letter and had no comment yet on its specific complaints. "In due course we will respond appropriately," he said. Another spokesman said the project "remains committed to meeting all aspects of the voluntary principles of human rights."

While the BP project has been in the pipeline for years and the company has signed several big supply deals with customers, the company hasn't formally declared that Tangguh will proceed. That decision is expected about the end of this year.

Mr. Browne recently visited Indonesia for talks with President Susilo Bambang Yudhoyono and other officials. Indonesian officials involved in the talks said BP wants to resolve some differences over the length of contracts for some of the gas fields that will supply the Tangguh facility before the company gives the plan final approval.

The letter to Mr. Browne argues that BP hasn't followed through on several commitments made years ago to improve transparency in the way the project is handled, particularly in regard to the facility's security arrangements. For example, it charges that the company hasn't publicized an apparent agreement withIndonesia's police force on how the plant will be kept secure.

The letter also says BP has been silent as the Indonesian government has implemented a series of controversial steps to split up Papua province.

Human-rights groups charge that those steps are aimed at strengthening the central government's control over the region and weakening support for separatist groups.

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