A test for big oil in Indonesia

From the mangrove-fringed shore, the waters of Bintuni Bay look deceptively calm. Only a metal platform a few miles offshore hints at the riches beneath this remote bay in eastern Indonesia.

If all goes according to plan, this languid scene will be transformed within four years into a $2 billion spider web of pipes and onshore processors that will convert Bintuni's gas reserves – among the largest in Asia – into liquefied natural gas (LNG) bound for markets in China, Korea, and Japan. The 500 or so residents of the village of Tanahmerah will relocate inland to a new site that they will help build.

But as BP, the British oil giant, embarks on the project, critics worry that it could fall into a disappointing pattern of global development, in which the presence of oil and mining companies in unstable countries exacerbates or even sparks civil conflicts.

BP says it wants to break the mold and hopes that the venture, called "Tangguh," or "invincible," will show that oil companies can be responsible investors in the developing world.

"We want to manage the impact so that we can be a force for good," says John O'Reilly, BP's senior vice-president of external affairs. "What we are doing is integrating the entire social dimension into the framework of the project."

But some human-rights groups in Papua, the Indonesian province that is home to Tangguh, are skeptical of BP's talk of social responsibility. "BP is a company and it's profit-oriented," says John Rumbiak, a veteran campaigner for human rights in Papua. "Don't pretend to be a church or a social organization."

With the Tangguh project, BP enters a remote corner of an unstable country where a repressive army is confronting a simmering separatist movement. In the province of Papua, also known as Irian Jaya, that tension was heightened by the murder last year of Theys Eluay, a popular pro-independence leader. Nine soldiers have been named as suspects in the killing.

BP is no stranger to conflict zones. Rebels have targeted its oil pipeline in Colombia, sparking reprisals by army units paid by BP to guard the pipeline. British newspapers have accused BP of supplying military equipment to abusive soldiers and spying on local communities. BP says it pays Colombia's Army for protection, but denies abetting any human-rights abuses.

Other foreign companies have already run into trouble in Indonesia. Freeport McMoran of Louisiana, for example, operates a gold mine in Papua that is guarded by thousands of troops and has become a byword for combative community relations. At the other end of the archipelago, Exxon-Mobil operates a similar LNG plant in Aceh that was shut down for four months last year after attacks by armed separatists.

It's hard today to imagine such strife in the backwaters of Bintuni Bay, where the few thousand inhabitants are mostly fishermen and farmers. Armed rebels, who have operated elsewhere in Papua for decades, are unheard of here. Local villagers are busy angling for jobs at the plant and jostling for land compensation and social-development funds.

"Most people would agree that BP has good intentions," says Diarmid O'Sullivan, who has studied conflicts over natural resources in Indonesia for the International Crisis Group, a global think tank. "The question is how far good intentions will get you in an inherently complex and unstable situation in Papua."

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