ARCO allocates US$50m for 900 golden handshakes

JAKARTA (JP): Oil and gas company Atlantic Richfield Company (ARCO) Indonesia, the subsidiary of Los Angeles-based ARCO, has set aside US$50 million to compensate about 900 workers who will retire voluntarily, the company said on Monday.

ARCO Indonesia's vice president of human resources and administration Wibowo Brodjonegoro said the company was seeking to reduce its workforce to 900 from 1,800 through a voluntary redundancy program in six months as part of its efficiency drive amid the severe economic crisis in the country.

"We have prepared the necessary money but the redundancy program might not absorb all the allocated funds," Wibowo said at a press conference.

With these funds the 900 workers will receive an average of $55,000 in severance pay per head.

"If the retiring workers deposit their severance pay in the banks, they will receive interest which could be higher than their current monthly take-home salary," Wibowo added.

Also on hand at the conference were ARCO Indonesia president Leon Codron and state oil firm Pertamina's head of foreign contractor supervision Gatot K. Wiroyudo.

Codron said the redundancy program would enable the company to save $100 million per year.

The company had taken advice from a consultancy firm regarding the proper number of workers that would fit its needs.

Codron said the retired workers would be offered a comprehensive severance package, including enough funds to set up business either in or outside the oil and gas industry.

But if participation in the voluntary separation program did not reach the required level, the company will apply a compulsory separation program, he said.

He said ARCO Indonesia had pursued an efficiency program since 1993 that had led to a 25 percent reduction in costs, but the global economic crisis which has led to collapsing oil prices has forced the company to restructure and rationalize its workforce in order to stay competitive.

As part of the restructuring, Codron said ARCO Indonesia had reduced its expatriate staff by 50 percent to 30 people.

"Our plans for restructuring our operations in Indonesia are based on the new economic realities of our industry and an ARCO global initiative to become a more price-competitive energy producer in every country in which we operate."

ARCO's Indonesian office is the last of its offices across the world to conduct the workforce-restructuring program, Codron said.

Nevertheless, ARCO Indonesia is thus far the only oil and gas company here which has taken a real step to cut down its workforce amid the economic crisis and collapsing oil prices.

ARCO has been operating in the country for 30 years and is currently involved in 10 production sharing contracts (PSC), of which three are productive blocks offshore North West Java, East Java and Kalimantan.

It accounts for 40 percent of the natural gas needs for power plants on Java.

Pertamina's data say ARCO currently produces the equivalent of 209,880 barrels of oil per day.

Codron said despite the workforce-reduction program, ARCO remained committed to further investing in the country.

It would proceed with its multi-billion dollar Tangguh liquefied natural gas (LNG) project in the country's eastern province of Irian Jaya where ARCO, together with British Gas and other partners had found more than 18.3 trillion cubic feet of proven and potential natural gas reserves.

The development of the Tangguh LNG project will require $4 billion in investment. (jsk)