http://www.asiasentinel.com/index.php?option=com_content&task=view&id=5095&Itemid=226
Indonesia Turfs out ExxonMobil Chief
Written by Our Correspondent
Wednesday, 09 January 2013
They'll be wanting to change that sign...
At stake is refusal to divest gas fields to Indonesian companies
Richard J. Owen, the chief executive of ExxonMobile Indonesia, has in
effect been kicked out of his job by an Indonesian government agency that
regulates oil and gas production over refusal by the US oil giant to divest
itself of gas fields coveted by Indonesian companies.
While the Energy and Mineral Resources Ministry denied it was demanding
that Owen be fired, it acknowledged that his contract to lead the company had
not been renewed by SKMigas, the temporary oil and gas regulator, whose
authority includes supervising the operations and management of oil companies
operating in Indonesia as well as monitoring energy company management
personnel.
At a time when foreign investors in the mining and oil and gas industries
in Indonesia are under increasing pressure from nationalist policymakers, the
move to force Owen out is certain to be viewed ominously by multinational
interests. Already large oil and mining companies say privately that they are
scaling back expansion plans in the country because of the policy environment.
A number of companies have put in place informal hiring freezes and have halted
new exploration plans because of the growing uncertainty.
With 2014 presidential elections on the horizon it seems certain that the
nationalist drive will continue for the time being.
"They do not realize how great the opportunity costs are of these
policies," said an investment consultant in Jakarta. "But a lot of companies
are starting to sour on Indonesia."
In the absence of strong leadership from President Susilo Bambang
Yudhoyono, it also appears that policies are being driven by individual
ministers, particularly Hatta Rajasa, the country's politically ambitious
coordinating minister for economic affairs, and others with vested interests.
Concern has been growing on the part of international investors - and
local businessmen as well - since early in 2012 when the government abruptly
cancelled international tenders for a US$1.3 billion new container terminal in
North Jakarta to replace the overcrowded and chaotic Tanjong Priok port,
announcing that the current port operation would do the contracting instead of
opting for a build-operate-transfer (BOT) arrangement.
It started to come clear at that point that Indonesia more and more
wanted to take ownership of major projects into its own hands and use
multinationals as hired concerns. Shortly after the cancellation of the port
tender, the government voided the sale of a major bank to Singaporean
interests. Those restrictions have extended dramatically into the country's
resource extraction industries, with new laws and regulations circumscribing
their operations. The goal appears to be to eventually take back ownership of
all of the operations now being run by such multinational giants as Freeport
McMoRan and Newmont, among others.
The move to terminate Owen's tenure appears to be related to ExxonMobil's
decision to call off the sale of assets owned by three local units, Mobil
Exploration Indonesia, ExxonMobil Oil Indonesia and Mobil Indonesia LNG,
operating in Aceh province. The assets included the Arun and North Sumatra
offshore fields, which produced an aggregate of about 215 million standard
cubic feet of gas per day.
ExxonMobile Indonesia actually proposed the sale in 2011. Several
investors expressed interest in the assets, including state gas distributor
Perusahaan Gas Negara, but Exxon reportedly refused to come to terms. Local
firms, such as Indonesia's largest publicly listed oil and gas company Medco,
had expressed interest in purchasing the shares.
At that point, Rudi Rubiandini, the deputy minister for energy and
mineral resources, publicly criticized Owen, saying his performance was "not in
the best interest of the nation. So he should be replaced."
Energy extraction officials have particularly been uneasy since the Nov.
13 decision by Indonesia's Constitutional court ordering the oil and gas
regulator BPMigas to shut down. The decision raised concerns that the verdict
could curb revenue from crude oil and gas exports and hamper future
international investment.
Under the terms of the 2001 law, BP Migas's job was to grant rights on
production-sharing contracts to oil and gas producers to explore for oil and
gas. Most of those contracts are with multinational producers. Because major
oil and gas producers in Indonesia are largely controlled by foreign investors,
including Chevron Pacific Indonesia, Total EP Indonesie, ConocoPhillips and BP,
the decision was regarded as a blow to their operations.
It appears that Indonesian officials decided that BPMigas was too close
to the companies it was regulating. In a country where court decisions often
have nothing to do with law and everything to do with politics, the suit that
put the agency out of business was brought by 42 organizations and individuals
who demanded a review of the 2001 law that brought the regulator into effect.
The plaintiffs included Muhammadiyah, one of Indonesia's largest Muslim groups,
and business organizations.
Its successor, SKMigas, denied there was any plan to fire Owen. However,
Hadi Prasetyo, the head of public relations for the new regulator, said that
"What happened is the government, in this case SKMigas, did not extend the
tenure of the ExxonMobil Indonesia president director, which will expire. He
added that that the decision not to extend the tenure of top staff at oil
contractors like ExxonMobil Indonesia was the prerogative of the government and
must be honored by oil companies.
The decision not to extend Owen's tenure, he said, is an example of the
government exerting its sovereignty through SKMigas, which assumed its
regulatory functions after BPMigas was wiped out by the court decision.
A spokesman for ExxonMobil was not available for comment on Thursday.
"ExxonMobil had requested the government extend [Owen's] tenure in late
2012 but SKMigas firmly decided not to do so. The government is not satisfied
with his performance and thus requests ExxonMobil to replace him," Hadi told
local media.
In 2011, ExxonMobil announced its decision to put its subsidiaries that
were operating in Aceh on the market. They were Mobil Exploration Indonesia,
ExxonMobil Oil Indonesia and Mobil Indonesia LNG.
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