The Development of Petroleum and Natural Gas as the Center of Growth in Aceh; A Case Analysis
Authors: Hadipoetro Sajidi , Nurandi Andi 
Published: December 2007

The Development of Petroleum and Natural Gas as the Center of Growth in Aceh; A Case Analysis.

Since the discovery of oil and natural gas by PERTAMINA-Mobil Oil Indonesia Inc. at Lhok Sukon - Aceh in 1971 and the construction of the LNG Plant at Lhok Seumawe which serves as a supplier of natural gas for export, the development in Aceh Special Region has been taking place rapidly. With the existence of the growth area at Lhok Sukon for 25 years, many people from Aceh and other regions have come to work as employees of LNG Plant, Contractors, Government employees and private employees. This phenomenon is especially due to the facilities provided by PERTAMINA, such as roads, electricity and business opportunities. To transport natural gas from Lhok Sukon Field to LNG Plant at Lhok Seumawe, a pipeline of approximately 30 kilometers was constructed from Point A to Point B. The road is designated only to serve as infrastructure for inspecting the pipeline, without any population on the left and right side. In 1992, the 20" dia. condensate pipeline had a leakage at KM-29 giving off flames reaching as far as 100 meters from the point of leakage. At that time the area was not heavily populated ; therefore there were no seriously injured. PERTAMINA is currently encountering problems of dense population on both sides of the road since the road between Point A and Point B has been paved and used by public road. In addition, the weight of the vehicles passing the road has exceeded the designed. To prevent an accident which occurred in 1992 from happening again, it is necessary to take measures which will be elaborated in this paper.

Introduction

The Republic of Indonesia is the world's largest country of archipelago in terms of population and area. It consists of 3,513 islands scattered along the equator. The area stretches approximately 3,500 mile from west to the east and 2,000 miles from north to the south. The surface of the area is 5,193,252 square kilometers (land : 1,904,S98 Km2 and sea 3,288,683 Km). Population (1991) is 193,000,000. There are 370 tribes with 67 dialects/languages in the country. The land is fertile and rich with natural resources: oil and natural gas, gold, nickel, coal, copper, tin, etc. Abundant natural resources, economic factor, stability in politics and security are interesting for investors.

Indonesia, is now in its second Long Term Development Plan (25 years). After a successful first Long Term Development Plan, Indonesia relied mainly on oil and natural gas. In the second Long Term Development, the role of oil and natural gas is still the main factor in making the plan a success.

Oil and natural gas are strategic mining materials, either for economic or for the nation development. For the smooth operation of oil and natural gas exploration and exploitation in an economical way, and to make the most of it for people, the nation, and the country, the Government of the Republic of Indonesia controls the exploitation of its oil and natural gas through a law (Act No. 8, 1971) which appoints PERTAMINA as the sole Government Enterprise assigned to take care of the exploitation of oil and natural gas throughout Indonesia. PERTAMINA has also the obligation to provide fuel for domestic use and feedstock for the petrochemical industry. PERTAMINA, in fulfilling its obligation, is assisted by foreign business partners in the form of a Production Sharing Contract, which is a limited joint venture in exploration and exploitation of oil and natural gas. Management of operation is in the hand of PERTAMINA, operation risk is held by the contractors, and natural gas after operation cost recovery.

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