Wed, 09 Mar 2005

Oiling Indonesia's squeaky wheel of diplomacy

Ivy Susanti, Jakarta

Over the past two weeks, oil has raised the collective temperature in Indonesia. The heat is not only limited to this country, but has spilled over to neighboring Malaysia, and -- most regrettably -- has fueled quite a lot of narrow-minded "nationalism".

Before declaring another Konfrontasi (literally meaning confrontation, used by Sukarno in a similar crisis 40 years ago) with Malaysia, let us remember that the issue here is not merely about Malaysia's possible violation of territory that is claimed by Indonesia, but about oil, money and Indonesia's reputation.

Daily news reports have eagerly published Indonesia's claim and Malaysia's argument, and the presence of warships and military aircraft in the area near the disputed territory, which may lead some to conclude that the two neighbors are edging toward military conflict.

But most of the newspaper stories do not really explain the urgency of this oil dispute near an island far from Java, nor what the local people there think about it.

On Feb. 16, Malaysia's state oil company, Petronas, awarded production sharing contracts (PSCs) to Shell and Petronas Carigali Sdn Bhd -- Petronas' exploration and production arm -- for the ultra-deepwater blocks off the east coast of Malaysia's Sabah state, the company explains on its website.

The two blocks, which Malaysia has termed Block ND6 and ND7, are situated in the Tarakan Basin, between 100 to 180 kilometers southeast of Sabah's easternmost land mass.

Petronas said that under the contract terms, Shell and Petronas Carigali would operate the blocks together. Shell has a 50 percent working interest, which is divided between Sabah Shell Petroleum Co. Ltd (40 percent) and Shell Sabah Selatan Sdn Bhd (10 percent), and Petronas Carigali owns the remaining half.

The Indonesian government filed a complaint with Malaysia claiming that the area where the two blocks are located -- Ambalat and East Ambalat -- is within its sovereignty.

Indonesia said that it had awarded PSCs to two foreign companies, ENI (Italy) for Ambalat in 1999 and Unocal (the United States) in East Ambalat block. Indonesia also said it had awarded oil exploration contracts in the area to foreign companies in the 1960s.

Within days of the announcement of the Petronas/Shell deal, Indonesia's military sent at least three warships and jet fighters to the area, but called it "a regular patrol in our territory".

Malaysia based its claim on a 1979 map, which is not recognized by the Indonesian government or by most of other countries bordering Malaysia, or so Indonesia says.

The ministry of foreign affairs here said it had repeatedly complained to Malaysia over its territorial claims. However, the ministry said over the weekend that it would not seek a hearing at the International Court of Justice (ICJ), the United Nations' principal judicial body.

Malaysian Prime Minister Abdullah Ahmad Badawi insists that the disputed oil resource areas are located within Malaysia's territory, saying, "If the area is somebody's else, why would Petronas go in there."

In fact, this is not the first time the countries have quarreled over oil. Last year, Malaysia received Indonesia's complaints over oil exploration rights in East Ambalat block.

At the time, Pertamina, Indonesia's state oil company, and Petronas were each trying to sell the block to international petroleum companies. Unocal won the Pertamina bid and signed the PSC in December 2004. Malaysia sent three protest letters at the time.

Jakarta's objection to Malaysia's move comes at time when this government is under pressure domestically, due to the fuel price hike.

Yet, there has been no official statement to explain that the price hike is essentially the consequence of an oil scarcity in Indonesia or elsewhere. There is no remark or action suggesting that we have run out of fossil fuel supplies, that the people must convert to non-oil resources or pay dearly.

As a result, the policy and its implementation are widely viewed as class-biased, as clearly shown through the government- sponsored TV ad explaining its decision to raise the fuel price to subsidize the basic needs of the poor.

In short, we have no idea how much the Ambalat oil resources contribute to national oil supplies or whether that would have made a difference in the price hike.

Minister of Energy and Mineral Resources, Purnomo Yusgiantoro, expressed the government's fear of losing money -- and face -- in the dispute, and urged Malaysia to respect Indonesia's territorial sovereignty.

He also said that he was not afraid that the present PSC holders would sue Indonesia if Ambalat were indeed lost to Malaysia.

In 2003, Malaysia disagreed with oil exploration concessions off the Sabah coast awarded by Brunei to French company TotalFinaElf. That led to a cessation of exploration activities by the two countries. The two countries' navies reportedly setting had a standoff in the oil drilling area, which was claimed as part of Malaysia's Exclusive Economic Zone (EEC).

One of Purnomo's deputies, Iin Arifin Takhiyan, said that the ministry had asked an independent company to measure the disputed area. Iin was quoted as saying, "if there is an overlapping area, the two sides can divide it."

Southeast Asian countries share lots of overlapping territories, mostly small islands, largely due to colonial-era territorial claims.

The governmental representatives have agreed to use diplomatic channels to settle the problem. Hopefully, Indonesia will not resort to a military solution.

The writer is a journalist at The Jakarta Post.