VZCZCXRO9753
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJS #0101/01 2990826
ZNR UUUUU ZZH
R 260826Z OCT 09
FM AMCONSUL SURABAYA
TO RUEHC/SECSTATE WASHDC 0482
RUEHJA/AMEMBASSY JAKARTA 0471
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RHHMUNA/HQ USPACOM HONOLULU HI
RUEHBJ/AMEMBASSY BEIJING 0011
RUEHWL/AMEMBASSY WELLINGTON 0184
RUEHBY/AMEMBASSY CANBERRA 0217
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEHJS/AMCONSUL SURABAYA 0494

UNCLAS SECTION 01 OF 02 SURABAYA 000101 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MTS, EB/ESC/IEC 
DOE FOR CUTLER/PO-32 AND NAKANO/P-42 
COMMERCE FOR USDOC 4430 
 
E.O. 12958: N/A 
TAGS: EPET ECON EINV PGOV PREL ID
SUBJECT: EXXONMOBIL'S CEPU PROJECT: LOCAL POPULATION PERSPECTIVE MORE 
POSITIVE THAN MEDIA PORTRAYAL 
 
REF: JAKARTA 1678 
 
SURABAYA 00000101  001.2 OF 002 
 
 
This message is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary:  ExxonMobil's operation of the Cepu oil field 
has come under harsh media criticism for failure to meet 
production targets and the expectations of the local population. 
 The situation on the ground, however, paints a different 
picture.  While eager to see more economic impact from the 
project in their communities, the local populace is generally 
satisfied with ExxonMobil's community development efforts and 
uneasy about how political bickering is slowing the project. 
Local activists complain that ExxonMobil talks directly to 
village leaders rather than to the activists to determine 
development priorities.  The Regent suggests that ExxonMobil 
should provide what the population needs -- as determined by the 
Regency -- rather than what they want -- as determined by the 
villagers themselves.  None believe that transferring operations 
to national oil company Pertamina would be a positive 
development.  End Summary. 
 
Expectations and Realities 
--------------------------------- 
 
¶2. (SBU) Operations at the Cepu oil field, straddling the border 
between East and Central Java, have become a source of 
contention between ExxonMobil and the Indonesian government. 
The company's difficulties acquiring land and permits slowed 
construction of the early processing facilities that are 
necessary to begin shipping oil.  BP MIGAS Chairman R. Piryono 
recently made public statements vowing to revoke ExxonMobil's 
contract if Cepu was unable to produce 15,000 barrels/day (bpd) 
by the end of September.  ExxonMobil is currently producing 
12,000 bpd, but are still constructing the facility that will 
allow the company to process 40,000 bpd.  Further complicating 
matters, BP MIGAS has not yet approved the 
engineering/infrastructure projects that would allow Cepu to go 
to full production up to 160,000 bpd.  Even if the project were 
approved tomorrow, ExxonMobil says there is no technical way to 
get to full production before 2013. 
 
¶3. (SBU) The media has strongly criticized ExxonMobil and its 
Cepu operating company, Mobil Cepu Ltd (MCL), for failing to 
meet production targets and improve economic conditions in the 
local communities.  A number of prominent voices have in turn 
demanded that national oil company Pertamina take over 
operations at Cepu.  On October 19-20, ConGen Surabaya travelled 
to Cepu and surrounding communities to get a better 
understanding of the situation on the ground and the sentiments 
of local leaders and average citizens.  Regency-level officials, 
village leaders, and local citizens expressed general 
satisfaction with MCL's operations and community development 
activities.  While all looked forward to reaping the economic 
benefits of MCL's operations, each had different expectations of 
what form those benefits should take. 
 
Pre-Schools and Employment, To Start 
--------------------------------------------- --- 
 
¶4. (SBU) MCL's operations and community development projects are 
evident in the villages immediately surrounding the facility. 
Pertamina prohibited MCL officials from meeting with Surabaya's 
PO, but representatives of IRE, a Yogyakarta-based NGO, offered 
a tour of village-level projects.  IRE works with MCL to 
facilitate communication with local communities, build community 
partnerships, and assist in development planning.  The IRE rep 
said that MCL was focused on three areas: health, education, and 
economic development.  He added that in contrast to the "elites" 
who wanted MCL to build large projects so that they could get 
their pictures taken at lavish opening ceremonies, villages have 
different priorities. The IRE rep observed that villagers never 
expect anything from the government or large companies, so are 
pleasantly surprised that MCL is following through on its 
promises, albeit slowly. 
 
¶5. (SBU) The head of a village located within site of the Cepu 
gas flare said villagers were generally happy with MCL's 
efforts, thus far.  He noted that MCL has hired villagers as 
security guards and laborers, which was bringing money into the 
 
SURABAYA 00000101  002.2 OF 002 
 
 
village, adding that MCL was careful to hire equal numbers of 
employees from multiple nearby villages so as to avoid 
jealousies. Other villagers have started small businesses, such 
as shops and food stalls, to support the facility's operations. 
The village head explained that MCL and IRE were careful to 
discuss all development plans with village leaders and engage 
them on priorities.  All development projects are cooperative 
efforts between MCL, IRE, and local governments.  At the village 
heads' request, MCL built pre-schools in 18 villages and was now 
working to improve road conditions.  Much still remains to be 
done and progress was never as fast as anyone would like. 
Teachers at the schools are unpaid volunteers and education 
materials are limited. 
 
Who Decides on Priorities? 
--------------------------------- 
 
¶6. (SBU) Self-described village "activists" were more critical 
of MCL's efforts to date, in particular MCL's limited authority 
to implement projects and programs without approval from Jakarta 
or BP MIGAS.  They praised ExxonMobil's high standard on Safety 
and Security issues and environmental concerns, but complained 
that ExxonMobil's definition of "local" hiring was too broad, 
and should be limited to people living in core villages near the 
facility itself.  An MCL employee at the meeting was hired from 
the regency's largest town, Bojonegoro, but the activists didn't 
consider him "local."  They also complained that MCL's 
development programs did not reflect the activists' priorities. 
For example, the activists argued that paving village roads 
should be the first priority, but MCL provided clean water 
projects instead.  The activists added that MCL should consult 
more with the activists themselves rather than village officials 
directly because the activists understood what the villagers 
really needed. 
 
¶7. (SBU) The Regent of Bojonegoro, Drs H. Suyoto, suggested that 
MCL should look to the regency's development plan to determine 
what the villagers "need" rather than what they "want."  He 
praised Petrochina for including local government plans in its 
community development strategy (CDS), suggesting that ExxonMobil 
was conditioned by the Sukarno era to believe that government 
didn't speak for the people. He did not elaborate on what form 
Petrochina's CDS took.   Suyoto observed that it did not matter 
to the regency who operated the field, so long as it was 
operated well since Bojonegoro had a 4.6% stake in the operation 
through its BUMD (Regional Government Owned Enterprise). 
 
¶8. (SBU) Suyoto said he had to continually remind the population 
that oil is just one element of Bojonegoro's economy, and would 
not provide sufficient revenues or employment for the entire 
population.  He explained that the Regency would receive only 6% 
of the project's total revenue.  If that total were distributed 
equally to each resident, each person would only receive 
approximately Rp 2 million (200 USD).  It was better, Suyoto 
argued, for the Regency to invest in infrastructure, education, 
and health and to encourage entrepreneurship to improve the 
quality of life and build the economy for the long term. 
MCCLELLAND