Long gone are the glory days of Indonesia as Southeast Asia’s main oil producer, but locals keep seeking opportunities to get their hands on the dried-out natural resource although it is illegal.
Scores of traditional “oil refineries” made of simple plywood and corrugated iron are seen mushrooming in Simpang Bayat village in Musi Banyuasin regency, South Sumatra, where illegal oil tapping has reached an alarming level.
Under the 2001 Oil and Gas Law, crude oil is defined as a “strategic natural resource” whose development should be under the central government’s control through such companies as state-owned PT Pertamina.
Those wood stoves process crude oil allegedly stolen from the 260-kilometer Tempino-Plaju pipeline, which delivers oil from wells in Jambi to Pertamina’s Plaju refinery in Palembang, South Sumatra.
“Oil distillation activities at those traditional ‘refineries’ were stopped and the stoves were left abandoned after Pertamina decided to suspend the operations of its pipeline,” said 52-year-old Kamari, leader of the Simpang Bayat village, over the weekend.
Kamari, who goes by only one name, said oil-theft cases rose in 2008, after an Energy and Mineral Resources Ministry regulation and a supporting bylaw on the management of aging oil wells.
Under those legal instruments, local residents were allowed to develop aged oil fields dating from before the 1970s in Sumatra that were previously developed by the Dutch colonial administration, which, according to Kamari, is referred to by locals as Minyak Balando (Dutch oil).
A local administration-owned firm, Petro Muba, was expected to absorb the crude oil managed by locals.
However, the company failed to comply with regulations in the following two years although community members in Musi Banyuasin and other regions had helped develop the old oil wells.
“Some Musi Banyuasin residents then began attempts at refining the crude oil themselves. The first village [in Musi Banyuasin] that managed to ‘cook’ the oil was Pangkalan Bayat,” said Kamari.
Next, those “do-it-yourself” oil-refining plants continued to spread until locals realized that the old oil wells would not be able to supply crude oil sufficiently.
“That was when they realized that they could supply the traditional refineries in a less costly way by illegally tapping the Tempino-Plaju pipeline passing through the regency,” Kamari said.
Most of the gasoline produced from the traditional refineries was sold in Lampung, South Sumatra and Bangka-Belitung, with most of the buyers being manufacturing industry players.
The gasoline is priced at Rp 750 per liter (8 US cent), cheaper than fuel sold at Pertamina’s gas stations.
The unbridled cases of oil theft have continued to spread in the region. In the first quarter of this year, illegal tapping caused Pertamina to lose 116,859 barrels of oil, or 21 times higher than the losses in the same period last year.
In October last year, the Tempino-Plaju pipeline, run by Pertamina’s subsidiary PT Pertagas exploded and killed nine people during an oil theft attempt.
On account of the most recent case, Pertamina has been forced to suspend operations at that pipeline after experiencing losses of Rp 280 billion this year due to, as the company describes, “massive, well-organized illegal tapping operations”.
The company suffered losses of Rp 15 billion due to oil theft in 2010. In 2011, the losses ballooned to Rp 177 billion and almost doubled to Rp 300 billion in 2012.
Wiko Migantoro, the Jambi field manager of Pertamina EP, Pertamina’s upstream arm, said in a separate interview that the perpetrators of oil theft were brazen in doing their job, citing that they had begun using guns to intimidate those trying to stop them.
“It seems that those perpetrators were backed by individuals within law enforcement and security institutions and thus it will be very difficult to stop it,” he said.
Indonesia, a former member of the Organization of the Petroleum Exporting Countries (OPEC), currently produces around 840,000 barrels per day, lower than the 1.6 million bpd it booked in 1995
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