Last week, I had occasion to attend a briefing from two members of the Tangguh Independent Advisory Panel (TIAP), Pak Augustinus Rumansara and the TIAP Chair Tom Daschle. Held at the law offices of DLA Piper in downtown Washington DC, the purpose of the briefing was to inform the public about the progress and challenges facing a consortium led by BP in Bintuni Bay located in West Papua. Mr. Rumansara and Senator Daschle shared their findings contained in the recently released FIRST REPORT ON OPERATIONS AND PROPOSED EXPANSION OF THE TANGGUH LNG PROJECT, which can be found here. By way of background, the Tangguh gas field lies in Bintuni Bay, in the province of West Papua, Indonesia. The natural gas field contains over17 TCF of proven natural gas reserves, with estimates of potential reserves reaching over 28 trillion cubic feet. Production began in June 2009.
According to the report, the TIAP, which has been in existence since 2002, “focuses on matters relating to security, human rights, governance, revenue management, the political environment and the broader issues relating to how Tangguh affects the people of Bintuni Bay and Papua and how the Project is perceived by them.” BP’s goal is to make Tangguh “a world-class model for development.” In addition, the TIAP provides advice about non-commercial aspects of the Tangguh LNG Project and to provide assurance to external stakeholders on the standards BP is following. Since it is difficult for international media or international NGO to enter the area of Papua, having an independent panel that makes independent reports makes it easier for BP in managing dialogue with international NGOs, especially in London and Washington DC – the panel provides an independent view of Papua and Tangguh Social Performance.
The TIAP’s work is shaped by a number of business and human rights standards, among them the OECD Guidelines for Multinational Enterprises, the Voluntary Principles on Security and Human Rights, the UN Guiding Principles on Business and Human Rights, and the IFC Performance Standards on Environmental and Social Sustainability.
As noted in the report, “TIAP focuses on matters relating to security, human rights, governance, revenue management, the political environment and the broader issues relating to how Tangguh affects the people of Bintuni Bay and Papua and how the Project is perceived by them. These factors relate directly to whether BP can achieve its goal of making Tangguh a world-class model for development.” As part of its evaluation of the project, the Panel seeks to promote “best practices, including adherence to the Universal Declaration of Human Rights; the Organization for Economic Cooperation and Development (“OECD”) Guidelines for Multinational Enterprises; the International Labor Organization Convention Concerning Indigenous and Tribal Peoples in Independent Countries; the World Bank Operational Directive with respect to indigenous peoples and the U.S. – U.K. Voluntary Principles on Security and Human Rights.”
This is the Panel’s third full report and it comes as BP has just completed the public consultation phase for the social and environmental impact statement (“the AMDAL”) as expansion of the facility gets underway. Tangguh’s third line, known as a train, is projected to start production as early as 2018 after construction begins in this year. The facility will cost $11 billion and produce as much as 3.8 million metric tons a year of the fuel. What I found of interest in the report were the challenges facing the company and the project. First, the macro-level political risks emanating from a resource nationalism that resulted “in antagonism toward foreign investment in the natural resource sector and its impact on the company and the Tangguh project. It is an election year, and it is possible that some of this rhetoric is political and will not translate into policy. But nearly every candidate for President, even those most supportive of foreign trade and investment in the past, has voiced a theme of natural resource nationalism that is critical of the status quo on resource development,” reports BP. Second, the report points out BP’s continuing progress on balancing its ongoing security needs at the facility while remaining sensitive to potential human rights implications arising from activities at the facility. BP is providing its own security for the project because it doesn’t want to have to pay big protection fees to guards from the Indonesian Defense Forces (TNI). Also mindful of its international image, BP doesn’t want any soldiers based at Tangguh lest it suffer the fate of other multinationals, such as FreeportMcMoRan and ExxonMobil, which have been accused of complicity in human rights abuses perpetrated by their military guards. BP has recruited at least 82 guards from local villages for its Community Based Security Program and plans to hire a total of 250 over the coming years when construction work peaks. The company says the project has also begun recruiting and training Papuan employees to operate and maintain the expected offshore production platforms. This sensitivity to human rights in the context of plant security and the surrounding communities would appear to be paying off. There were only 38 grievances or concerns submitted by the community in 2013, substantially fewer than the 115 grievances filed in 2011. I find the Tangguh operation to be an interesting case study in doing it right and hope that we will see similar approaches on development projects in the future.