|In Place of the Forest: Environmental and Socio-economic Transformation in Borneo and the Eastern Malay Peninsula (UNU, 1990, 310 pages)|
|Part 1 : Background and the course of events|
|Change since World War II|
Revival of oil exploration and development
By 1960 the land-based petroleum production of most Borneo fields was growing only slowly or was in decline, whether from reduction of resources or for political reasons; on the Peninsula there was no petroleum production. This was, however, a period in which improved techniques of exploration, and especially of offshore drilling, were being perfected elsewhere in the world. In the new political climate they were soon applied in South-East Asia. The first major offshore discoveries were made from Brunei and Sarawak, and in the second half of the 1960s the first offshore wells came on stream.3 In Indonesia, where Shell sold its assets to the Sukarno government in 1965, the introduction of production-sharing agreements by the Suharto administration in 1966 stimulated new investment in development and in exploration, both on land and offshore. Total Indonesian output more than doubled between 1968 and 1973 (Arndt, 1983: 138). In Malaysia, exports increased fourfold between 1965 and 1971, but a part of this was re-exported Brunei crude; when Shell completed new refining facilities in Brunei, Malaysian exports stagnated for several years (Government of Malaysia, 1971, 1976).
The oil and gas boom, and its sequel
To Indonesia and Malaysia, the first oil-price "shock" of 1973 was of enormous benefit, and the subsequent further price doubling in 1979 held boom conditions in place for a full decade. Even though oil exports were still quantitatively small at the time, the price rise eliminated all balance-ofpayments problems. There was great stimulus to new exploration, which soon also led to large discoveries of natural gas. By the late 1970s, the existence of more oil pools and of big gas resources had been established off large sections of the eastern and northern coasts of Borneo, and also in the western South China Sea off the north-eastern Peninsula. By the later 1980s a large part of what had been discovered was developed. Figure 3.1 details the present distribution of the resource and its exploitation around Borneo.
After the boom period was over in 1986, 56 per cent of Indonesia's exports by value were still derived from petroleum and natural gas, though this had declined to 37 per cent by 1991/92; for Malaysia, the proportion was much less, 18 per cent; while for Brunei, which is a major producer of both oil and gas, it reached 97 per cent (Rigg, 1991: 164). Even with lower prices, oil and gas still put East Kalimantan in first place among Indonesia's provinces in terms of wealth creation, providing more than 5 per cent of the nation's GDP (Statistik Indonesia, 1992), with a 1990 per capita income above US$2,800. Brunei, with a per capita GDP of over US$17,500, is among the world's richest countries (The Far East and Australasia, 1994). The contribution of energy production and processing to the income of Sarawak is much smaller, but gas production was forecast to double between 1990 and 1995, and this will principally feed Sarawak's enlarged LNG plant at Bintulu (Government of Malaysia, 1991a). The refineries and LNG plants, in both parts of Borneo, are also the major national sources of inorganic fertilizer, and furnish an important regional export.
Borneo as a major future source of energy
With exploration continuing into ever-deeper waters, there seems no doubt that production, especially of gas, will continue to expand through the 1990s. However, the rising rate of energy demand in the region, coupled with oilresource limitations, leads to predictions that both Indonesia and Malaysia may become net importers of petroleum by as soon as the year 2000 (e.g. Government of Malaysia, 1991a; Clark, 1993; Hardjono, 1994). Natural gas, on the other hand, will certainly last well into the twenty-first century. In both countries, principal electricity generation is therefore being shifted from scarce oil to abundant gas, in Malaysia the latter providing 9 per cent in 1985, 24 per cent in 1990, and a projected 75 per cent in 1995 (Government of Malaysia, 1991a: 308).
With a view to the longer term however, increasing attention is also now being given to the substantial resources of mainly soft, but lowsulphur and lowash coal in southern and eastern Kalimantan, Sarawak, and Sabah, as major future energy sources for the two countries. The sedimentary sequences around large parts of northern, eastern, and southern Borneo exhibit characteristic successions through sandstones and clays to coal measures, some of sufficient size to be already attracting the interest of multinational corporations, which plan development for export to Japan in particular. One large Australian-based multinational is already involved in East Kalimantan, with an open-cast mine employing over 2,000 workers exporting steaming coal to Japan (Reuters News Service, 29 March 1993). Much of this coal is Pliocene or even Pleistocene and at shallow depth. Other resources, however, lie in bedded seams in already folded or block-faulted Miocene deposits well inland. Very large resources also exist north of the Rejang River in central Sarawak. Another, currently the subject of controversy since its exploitation would entail destruction of a unique floristic complex, occupies an enclosed and unpopulated synclinal basin within sandstone, in Sabah. East and South Kalimantan's Tertiary deposits are measured at nearly 2 billion tonnes out of 4.3 billion for the whole of Indonesia (Department of Mines and Energy, quoted in Indonesian Commercial Newsletter, 9 December 1991), but inferred reserves may be much larger. Although Indonesian coal production increased from 2 to over 14 million tonnes between 1986 and 1991 (Indonesian Commercial Newsletter, 8 March 1993), mining is still on a very small scale in comparison with the total size of the resource.
Hydroelectricity is also receiving closer attention, especially in the Peninsula and Sarawak. There are eight hydroelectric plants operating in the Peninsula and one in Sarawak, collectively generating about as much electricity as is fired by imported coal. A proposed dam at Ulu Tembeling, on the upper Pahang system in the Peninsula, was very seriously considered in the 1970s, but strongly opposed on environmental grounds. Another smaller scheme in the northern Peninsula has produced a good deal of controversy because of an apparent link between British aid in its construction and the supply of other British products to Malaysia, including armaments.
The largest proposal, however, is in Sarawak. The Bakun scheme on the Rejang in Sarawak would, in its original design, have supplied enough power for export by cable - if this proved technically feasible - to the Peninsula, as well as meeting all the needs of Sarawak and Sabah. The Bakun dam would have displaced a considerable number of people, and planning had gone forward some way before it was halted by the depression in the mid-1980s. However, with Malaysia's emphasis on further industrialization with expanding power needs, the Bakun project has recently been revived in a new form. In a concession to critics, the project now comprises a series of at least four smaller dams rather than a single large one, thus reducing - but also spreading impacts on the environment and the Iban people (Renter, Asia Pacific Business Report, 17 September 1993). Other and smaller schemes, such as the Batang Ai dam in western Sarawak, have already totally displaced numbers of people from their land.4
Thus far, there is only a single hydroelectric plant in Kalimantan, in the drought-prone south-east, and it performs poorly. However, the potential hydroelectric resources of Borneo might reach at least 60,000 MW; the Sarawak potential alone is estimated at 20,000 MW. As energy generation shifts away from hydrocarbons, these sources must be expected to attract increasing attention in the future.