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Indonesian court’s verdict on Chevron scares investors
Publication Date : 10-05-2013
The Jakarta Corruption Court’s decision to imprison executives from two of Chevron Pacific Indonesia’s (CPI) contractors for their roles in a corruption case involving the US-based oil company’s environmental project will harm the investment climate in the country’s oil and gas sector, the upstream oil and gas regulator has said.
“The case could upset the investment climate in the upstream sector, and ultimately delay the government’s campaign to increase production and find new hydrocarbon reserves,” said upstream oil and gas regulatory special task force (SKKMigas) spokesman Elan Biantoro on Thursday.
CPI, a subsidiary of US giant Chevron, is currently the largest crude oil producer in the country, ahead of Indonesia’s state-run Pertamina, with output of around 300,000 barrels per day (bpd) of oil, amounting to 40 per cent of the nation’s total oil production.
Elan added that the government had yet to reimburse the US$9.9 million spent by CPI on the project and, thus, there were no state losses in the case.
The regulator was referring to developments in the CPI case at the Jakarta Corruption Court.
The court sentenced on Wednesday the director of environmental services company PT Green Planet Indonesia, Ricksy Prematuri, and the director of construction services firm PT Sumigita Jaya, Herlan bin Ompo, to five and six years in jail, respectively, after finding both executives guilty of causing state losses.
Both Ricksy and Herlan must also pay resepctive fines of 200 million rupiah ($20,600) and 250 million rupiah, according to the court’s verdict.
Green Planet was ordered by the court to refund $3.089 million in state losses within a month or the court would confiscate the company’s assets, while Sumigita was ordered to reimburse $6.9 million in state losses.
The sentences were lighter than those sought by prosecutors from the Attorney General’s Office (AGO), who wanted Ricksy sentenced to 12 years in prison and a 1 billion rupiah fine or another six months in prison, and Herlan sentenced to 15 years in prison and a 1 billion rupiah fine or another six months in jail.
The two companies were hired by CPI to execute its bioremediation programme from 2003 to 2011 at the company’s oil and gas field in Riau.
Bioremediation is a method in which metabolic microorganisms are used to remove pollutants for environmental conservation.
Judge Sudarmawatiningsih, who led the panel of judges, said neither of the two firms had the necessary “qualifications” to conduct the project.
“Green Planet and Sumigita did not possess any certification from the Environment Ministry to implement such projects as specified in the Environment Ministry’s regulation in 2003,” she said.
She added that Green Planet was guilty of not completing the bioremediation project, while Sumigita did not possess the facilities or bioremediation experts to undertake the project.
One of the panel of judges, judge Sofialdi, voiced a dissenting opinion on the verdict, saying that the 2003 Environment Ministry regulation only pertained to CPI as the waste producer as opposed to Green Planet and Sugitama.
Prosecutors told reporters that they would be filing an appeal against the sentences.
In addition to the two contractors, three CPI employees, Endah Rumbiyanti, Kukuh Kertasafari and Widodo, are also due to stand trial for implementing the programme and appointing PT Green Planet Indonesia and PT Sumigita Jaya.
Another employee, Bachtiar Abdul Fatah, previously accused by the AGO of involvement in the project, was freed following a preliminary hearing after the court deemed his incarceration to be “illegal”.
Maqdir Ismail, Chevron’s legal counsel in the case, told The Jakarta Post that Endah, Kukuh and Widodo would likely be sentenced in late June as they had yet to be indicted by prosecutors.
CPI spokesman Yanto Sianipar said separately that the firm remained confident that its employees had not caused any state loss or committed any illegal activities.
“CPI hopes that the panel of judges will fairly and objectively review the facts of the project,” he said.
Legal uncertainty has oft been cited as one of the factors behind the low investment in the upstream oil and gas sector.
Oil and gas contractors, such as American companies Anadarko and Hess, reportedly left the country because of this uncertainty as well as having conducted years of loss-making exploration in Indonesian waters.