(PT Seleras Inti Semesta, PT Medco Papua Alam Lestari, PT Medco Papua Industri Lestari, PT Kasuari Komoditas, PT Energi Mitra Merauke, PT Tebu Wahana Kreasi, PT Papua Daya Bioenergi)
Company Description: The Medco group is the business conglomerate of the Panigoro family and comprises Medco Energi Internasional, Medco Agro, and Bank Saudara amongst other companies. Medco Energi is Indonesia’s biggest private oil and gas company. Its oil and gas operations can be found in Sumatra, Java, Sulawesi and Kalimantan in Indonesia, and it also has exploration licences in Libya, Cambodia, Yemen, Tunisia and the United States.
Medco bosses have frequently mentioned that one of their strategies is to develop their strength in the agribusiness sector because they believe that oil and gas will not be profitable for more than another decade.1 They already operate several oil palm plantations in Sumatra and a plant in Lampung for extracting bioethanol from cassava.
Owned by: The Medco group was founded by Arifin Panigoro, and it remains the family business, with Arifin’s brother Hilmi Panigoro as the current Chairman of Medco Energi. The brothers were listed at number 21 on Forbes list of the richest Indonesians in 2010, but lost half their fortune when a deal fell through to sell Medco to state-owned petroleum company Pertamina.2 Hilmi Panigoro is also the chairman of the Indonesian Renewable Energy Society (METI).3
Medco Energi Internasional is listed on the Jakarta stock exchange. Japan’s Mitsubishi Corporation bought a 39.4% stake in Encore Energy Pte Ltd, a holding company registered in Singapore which controls 50.7% of Medco Energi Internasional Tbk.4 When that deal was arranged, the two companies also signed a ‘strategic alliance agreement’ where the companies agreed to co-operate to strengthen their respective presence in certain business sectors, including bio-ethanol.
Medco Agro is a privately owned company and has oil-palm plantations in Sumatra and Kalimantan. The Medco Foundation takes charge of Medco’s corporate social responsibility initiatives.
Plans for Merauke: Medco has been a key player in shaping and promoting the MIFEE project since the outset. Medco’s founder, Arifin Panigoro, went so far as to make sure he was initiated into the Gebze clan so he would be able to further his interests in the area.5
Medco’s interests in Merauke are in three principle areas: wood products, sugar-cane for bio-ethanol and promotion of MIFEE for other crops.
Wood Products: Medco has made its first incursions into Merauke in the field of industrial tree plantations. A subsidiary of Medco Agro, PT Medco Papua Industri Lestari has constructed a factory in kampung Boepe by the banks of the Bian river. Another subsidiary PT Selaras Inti Semesta has secured a 301,600 hectare allocation for monoculture tree plantations.6
The factory was initially planned to produce pulp, but NGO Conservation International claim to have persuaded Medco to ‘downgrade’ their factory to produce wood chips and pellets instead.7 Korean Company LG International joined in on the pellet plan, investing $25 million for a 25% share in a joint venture company, PT Metra Duta Lestari.8 Medco owns 66% of that company while another Korean company, Y-Han holdings, has the remaining 9%. Woodchips would be used for pulp and the wood pellets exported as biomass fuel.
Sugar cane: Another Medco subsidiary, has been allocated 74,000 hectares for a sugar cane plantation. Medco intends to use this for the production of bio-ethanol. The latest information from the company is that they are progressing with an initial phase of 43,000 hectares and they hope to be operational by 2014-2015.9
A number of other companies planning to develop sugar-cane are also believed to be linked to Medco. PT Kasuari Komoditas is reported to be operating a small trial sugar-cane plot near to kampung Harapan Makmur in Kurik district and is trying to get permits to plant in Tanah Miring district.10 It can be guessed that PT Tebu Wahana Kreasi, PT Papua Daya Bioenergi and PT Energy Mitra Merauke are also linked to Medco as they are registered at a Medco address in Jakarta. The first two of these three companies have been awarded land within MIFEE’s cluster 1.11
Other food and fuel crops: Medco has an integral part of the team promoting Merauke as a location for food and fuel development. They have operated a farm in kampung Serapu for several years known as MIFEE mini. The farm has served as a research and demonstration program and was the site for the official MIFEE opening ceremony.12 Amongst the crops Medco has been experimenting with is organic rice, produced using a technique known as ‘System of Rice Intensification’ (SRI), which the Medco Foundation has already introduced to other parts of Indonesia.13
In 2009 Medco commissioned a Colorado-based US agrofuels company, Neatech, to conduct a feasibility study into developing sweet sorghum for the production of ethanol in Merauke. This study was paid for by the United States Trade and Development Agency to the tune of $320,924.14
Stories from the Ground: Communities areas affected by Medco’s tree plantations and factory, including in Zanegi, Kaliki and Boepe kampungs have experienced how Medco has made many promises of new facilities which it has not built, deceived people into handing over their ancestral land and given pitifully low levels of compensation for the use of their land. Villagers from kampung Sanggase engaged Medco in a major dispute throughout 2011 when they demanded 65 billion Rupiah in compensation or they would shut the factory down. Details of all these disputes are given in the ‘Stories from Villages’ section.
As yet no reports have emerged of activity on the ground or conflict with local people as a result of Medco’s sugar or rice operations.
Other Conflicts around West Papua and Indonesia: Medco have also recently established an oil palm plantation in Prafi, near Manokwari in West Papua province. As in Merauke, local people opposed the plantation because they feel that they have not been involved in decision-making and have been given a very low level of compensation for their land.15
An oilfield in Central Sulawesi jointly operated by Medco and state oil company Pertamina has also been the focus of recent conflict. After local people clashed with at the companies’ Tiaka site, police opened fire, killing two and severely injuring several others.16
5. http://www.meraukepos.com/2009/08/arifin-panigoro-dikukuhkan-jadi-anak.html The US ambassador and Suharto-era Agriculture minister Sarwono Kusumaatmadja were witnesses to the ceremony.
6. It appears that PT Selaras Inti Semesta is under Medco Agro rather than Medco Energi, although neither company claims in in their reports or propaganda. See for example http://www.dephut.go.id/files/IUPHHK_HT_2009.pdf which lists PT Selaras Inti Semesta as being owned by PT Api Metra Palma, the holding company for Medco Agro.
7. http://online.wsj.com/article/SB10001424052748704238104574601613833960636.html has news of the announcement and CI’s methodology can be read about in the technical note they prepared:http://nau.academia.edu/OpheliaWang/Papers/140456/Area_Prioritization_for_Medco_Concession_in_Merauke_Report_to_Conservation_International
10. The link to this information (http://ditjenbun.deptan.go.id/budtansim/index.php?option=com_content&view=article&id=63:pertemuan-koordinasi-dan-pemantapan-rencana-pembangunan-perkebunan-tebu-di-merauke&catid=8:inventaris-berita&Itemid=30) was broken when we went to press in 2012. At that time the information was obtained through Google’s cache. PT Kasuari Komoditas is linked to Medco by information picked up on Twitter, but the veracity has not been confirmed.
13. http://www.medcofoundation.org/sprog.php?id=21&strlang=ind More information about SRI can be found in this FAQ: http://sri.ciifad.cornell.edu/aboutsri/FAQs.html
14. Announcement of the grant: http://www.ustda.gov/news/pressreleases/2009/SouthAsia/Indonesia/IndonesiaMedcoandPERPAMSI_081209.asp What seems to be a leaked version of Neatech’s field report can also be accessed online at: http://www.pricklyresearch.com/webdump/TAMU_Sorghum_Biofuels/Binder1.pdf