Medco E&P Indonesia

Harmonizing Economic, Environment, and People Development through Community-Based Sustainable Agriculture

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Author

Arief Sugito

Arief Sugito

School

IPMI International Business School

IPMI International Business School

Professor

Amelia Naim Indrajaya

Amelia Naim Indrajaya

Global Goals

1. No Poverty 2. Zero Hunger 10. Reduced Inequalities 11. Sustainable Cities and Communities 12. Responsible Consumption and Production

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Summary

The community based sustainable agriculture through the Organic System of Rice Intensification Program (SRI) has been able to reduce environmental degradation. The agriculture technique uses environmental friendly materials such as organic fertilizer and pesticides coming from community animal waste (cows, goats, and chickens) and local vegetation replacing the chemical fertilizer and pesticides. This method is not only reducing production costs by 60%, as farmers do not have to buy chemical fertilizer and pesticides, but also brings benefit to the environment by creating a cleaner environment and reducing production of methane gas which is the source of greenhouse gas emission that contributes to climate change.

SRI has been able to bring benefits to the smallholder farmers by improving land productivity by 300% from 0.5-2 ton per hectare to 7-8 ton per hectare that leads to the increase of farmers’ income by IDR 15million (USD 1,145) per hectare of land.

Another feature that makes this program successful is the involvement of community / smallholders farmers since the beginning of the program's development. Farmers were involved in the planning process by participating in a workshop to deconstruct obstinacy, develop conceptual ideas on sustainable and environmentally friendly ecosystem management, explain the function and role of organic materials within the ecosystems, and prove their value. In the implementation stage, farmers contributed to the program by providing labour, promoting farmer’s mutual cooperation, and providing cash to buy simple equipment. This has brought strong ownership of the program which is fundamental for program sustainability.

Innovation

The community-based sustainable agriculture practice through the Organic System of Rice Intensification (SRI) Program implemented in Suka Makmur Village, Musi Rawas Districts, South Sumatera Province, Indonesia has been able to improve the smallholder farmers skills to produce organic fertilizer and pesticides using its local community animal waste from cows, goats, and chickens and local vegetation such as Maja and Pace fruits, change farmers' old habit that relies on chemical fertilizer and pesticides, and introduce them to sustainable agriculture principles from land preparation, seeding, planting, nurturing and harvesting.

The program has also been able to strengthen the community and company cooperation as the rice product is bought by the Medco Foundation which then through its company cooperative sells again the product to the Medco staff and market. This has brought economic benefits both for the smallholder farmers and the company. Furthermore, this has significant impact to the economic sustainability since farmers can get higher income due to higher yield of rice product per hectare land, reducing the production cost to buy chemical fertilizer and pesticides, and market certainty as the rice is bought by the Medco Foundation.

Harmonizing Economic, Environment, and People Development through Community-Based Sustainable Agriculture

Inspiration

The Organic SRI Program has been able to solve the smallholder farmers’ problem of access to fertilizer and pesticides, which has previously been impact by big distributors and the low productivity of their rice farm, by implementing sustainable agriculture principles. Thus, it has brought benefits to the farmers by increasing farmer incomes as production cost decreased since they do not have to buy the chemical fertilizer and pesticides, increase rice farm productivity, and facilitate farmer self-sufficiency.

In addition, the program has also brought benefit to the environment through a reduction of methane gas production and other negative impacts on the land, improvement of land ecosystem through repairing the physical and chemical character of the land using organic fertilizer and pesticides, and reduction Carbon Dioxide (CO2) and Carbon Monoxide (CO) products by eliminating the burning of dried rice stalks.

Another factor that makes this program successful is the involvement of community/ smallholders farmers since the beginning of the program's development. Farmers involved in the planning process by participating in the workshop to deconstruct obstinacy, develop conceptual ideas on sustainable and environmentally friendly ecosystem management, explain the function and role of organic materials within the ecosystems, and prove their value. In the implementation stage, farmers contribute to the program by providing labour, promoting farmer’s mutual cooperation, and providing cash to buy simple equipment. This has brought strong ownership of the program which is fundamental for program sustainability.

Overall impact

The program has been able to bring benefits to the smallholder farmers, farmers that own land less than 2 hectares, by improving land productivity by 300% from 0.5-2 ton per hectare to 7-8 ton per hectare that leads to the increase of farmers’ income by IDR 15million (USD 1,145) per hectare of land. The sustainable agriculture system has reduced production costs by 60% as farmers do not have to buy chemical fertilizer and pesticides and also overcome the chemical fertilizer and pesticides shortage that often exist and reducing their dependencies to the chemical fertilizer and pesticide company.

The program has been able to reduce environmental degradation as the agriculture technique uses environmental friendly materials such as organic fertilizer and pesticides using local community animal waste (cows, goats, and chickens) and local vegetation replacing the chemical fertilizer and pesticides. This method is not only bringing economic benefits to the farmers but also brings benefit to the environment by creating a cleaner environment and reducing production of methane gas which is the source of greenhouse gas emission that causes climate change.

Business benefit

The Medco Foundation, through its cooperative, has gained profits from buying the rice product from the farmers and selling it to the Medco staff and market. This profit has become one source of income to the foundation and is embedded in its business process.

The program has also brought benefit to the company by improving the company reputation and image that has been recognized by Indonesian Government and United Nations. The company received a UN Millennium Development Goal award and Certificate of Recognition that was broadcast nationwide. In addition, the company has been recognized by the Indonesian Government for implementing environmentally friendly principles and received Green Proper Award.

Social and environmental benefit

The implementation of the organic SRI in Suka Makmur Village has enabled villagers to rediscover their community identity through cooperation on the land farming, resolving collective problems and by developing their village. Such activity has also helped to reduce agricultural production costs, mainly related to manpower and supply materials for agriculture activity. The Organic SRI Program has changed the life of the villagers and transformed the village into the best village in Musi Rawas District (it received the award for the best village in Musi Rawas District & the sixth best village in Indonesia). This achievement has become the spiritual fuel for Suka Makmur villagers to keep up their good work.

Environmentally, the Organic SRI Program has played a significant role in reducing water usage. Methane gas production, which destroys the ozone layer, has also been reduced. The use of organic fertilizer and pesticides made from environmentally friendly local organic materials has also contributed to improving the physical and chemical traits of the soil, so that soil fertility will recover. The effort to encourage farmers not to burn straw has also contributed to the reduction of CO and CO2 production, which is a potential threat to the ozone layer, impacting climate change.

Interview

Yusuf Suharso, CSR Coordinator

Business information

Medco E&P Indonesia

Medco E&P Indonesia

ID
Business Website: http://www.medcoenergi.com
Year Founded: 1992
Number of Employees: 1001 to 5000
Medco E&P Indonesia is a subsidiary of Medco Energi International, Tbk. for oil and gas activities in Indonesia, focusing on upstream activity, exploration, development and production of crude oil and natural gas. MedcoEnergi’s upstream activities began with its 1992 acquisition of Tesoro’s Oil and Gas E&P contracts (Sanga-Sanga/Samboja/Tarakan Blocks TAC and Tarakan Block PSC) in East Kalimantan, MedcoEnergi proceeded to successfully demonstrated its capability in redeveloping and improving the production of mature fields in East Kalimantan. The success in enhancing the performance of mature fields in East Kalimantan, on top of the successful stocks IPO in early fourth quarter 1994, strengthened MedcoEnergi’s confident to expand its upstream activities. In 1995 the Company acquired PT Stanvac Indonesia from Exxon and Mobil Oil. The Company acquired Oil and Gas E&P contracts (PSCs) in South Sumatra through this transaction.