Extortions costing oil firms in Aceh

Wahyoe Boediwardhana, The Jakarta Post, Denpasar, Bali

Extortions made against oil companies are on the rise in Aceh, following last December's landmark truce between the Free Aceh Movement (GAM) and the Indonesian government, an official said on Thursday.

Rachmat Soedibyo, the chairman of the Oil and Gas Implementing Body (BP Migas), complained that the extortions were inflating the economy, and costing the oil companies dearly.

Rachmat lashed out at GAM members, whom he accused of intensifying the extortions after the successful peace pact.

"Those people, who claim to be GAM members, no longer carry out the extortions in secret, but they now do it openly after the truce," Rachmat said during a meeting between BP Migas and its production sharing contractors (KPS) on the resort island of Bali.

"The irresponsible people extort money from several oil firms in Aceh on the grounds that they need funding for 'organizational consolidation,'" he said.

He said this had increased the production costs of the oil companies in Aceh by about 1 percent.

The amount is quite significant because average production costs for companies in Aceh reaches between US$4 billion to $5 billion per year, Rachmat said.

He said that rampant extortions had also contributed to a lower oil output in Aceh, which means that the oil companies were unable to meet the oil production target.

He said that as a result of the problem, BP Migas had to reduce the oil production target to 1.27 million barrels per day this year, compared to about 1.4 million barrels per day over the past 10 years.

BP Migas has asked the police to immediately tackle the extortion problem because of the severe impact it was having on oil production.

Rachmat feared that oil and gas investors would continue to shy away from investing in the country unless the government moves decisively to resolve the problem.