Gulf goes on operating S. Sumatran project

Gulf goes on operating S. Sumatran project

JAKARTA (JP): Oil and gas company Gulf Indonesia Resources, a
subsidiary of Canada's Gulf Resources, is continuing the
operation of a natural gas project in the Corridor block of South
Sumatra despite a local court's provisional order for the company
to stop operation.

Company lawyer Deny Rijadi told reporters that the provisional
judgment made by the Sekayu District Court, ordering the company
to stop operation could not be implemented until it was upheld by
the provincial court.

"We have sent a letter to the South Sumatra High Court asking
for an annulment of the judgment," said Deny, who was accompanied
by Sidick Nitikusuma, spokesman for the state oil and gas company
Pertamina's board of directors for the supervision and management
of foreign contracts.

The Sekayu District Court issued the provisional judgment on
Wednesday of last week pending the final decision on the land
dispute involving Gulf and the oil palm and coconut plantation
owned by PT Sentosa Muliabahagia.

The provisional judgment further stated that if Gulf continues
its operation, the company must pay Sentosa Rp 1 million (US$125)
per day in compensation.

Sentosa has accused Gulf of appropriating plots in its
plantation area to develop gas terminals and pipelines, without
paying compensation.

The gas project is part of the central Sumatra gas pipeline
project involving state gas distribution company PT Perusahaan
Gas Negara (PGN).

PGN has built a 536-kilometer gas pipeline across central
Sumatra to transport gas from Gulf's gas fields in the Grissik
area to the Duri oil field in Riau, owned by PT Caltex Pacific
Indonesia.

Gulf receives 50,000 barrels per day (bpd) of crude oil from
Caltex in exchange for the gas.

PGN and Gulf started operation of the gas pipeline project on
Oct.1. President B.J. Habibie was scheduled to dedicate the gas
pipeline on Thursday of last week but he dropped the plan,
reportedly due to concerns over the land dispute.

Deny said Gulf started exploratory activities in the Corridor
block in 1983 and found gas reserves in the area in the early
1990s.

Gulf then sought to appropriate about 20 hectares of land in
the block's area to build a gas plant in Grissik and pipelines
linking it to its gas fields in the Bayung Lencir, Letang and
Dayung areas.

Deny said the company followed the directives of the
Musibanyuasin district administration in appropriating the land.

Between 1995 and 1996, Gulf paid compensation to 57 families
living in the area designated for the gas plant.

In February and March of 1996, Gulf paid Sentosa an additional
Rp 120 million in compensation for the land to be used for the
development of Gulf's pipeline. The money was given to Sentosa's
plantation administrator.

However, more than a year later, Haji Halim, the owner of
Sentosa, claimed that he had not received the money. He also
demanded additional compensation, arguing that the land used by
Gulf to build its gas plant also belonged to him.

"It's true that we did not give the compensation to Halim
personally but we gave the money to the plantation administrator,
which means that we have fulfilled our obligation to the
company," Deny said.

Furthermore, he said, the Musibanyuasin district
administration never stated that the land where Gulf built its
gas plant belonged to Halim.

Deny said Sentosa's plantation was state land on which Halim
received a land use permit to develop an oil palm and coconut
plantation in July 1997 -- more than one year after Gulf paid
compensation to Sentosa's administrator.

Deny said the project would bring in $750,000 of revenue per
day to Gulf and the Indonesian government. Sixty-five percent of
the revenues will go to the government.

"The government will lose the chance to obtain a large income
if the operation is ordered to stop," Deny said.

South Sumatra Governor Rosihan Arsyad has come out in support
of continuing Gulf's operation. He said Gulf should be allowed to
continue its operation until the court made a final judgment,
because the company's operation posed no security or safety
threat to the plantation.

Deny said that although Gulf considered itself to be on the
right side in the land dispute, it was ready to seek a compromise
with Halim in order to settle the case.

He said the case had raised concerns among foreign investors
over the country's lack of legal security and the
unpredictability of court decisions. (jsk)