Riau province to jointly own CPP's oil block<\/p>\n
By Haidar Anwar Tanjung<\/p>\n
PEKANBARU, Riau (JP): The planned establishment of Riau
\nPetroleum by the provincial administration of Riau marks a new
\nstage in its fierce battle with Jakarta for control over the
\nCoastal Plain Pekanbaru (CPP) oil block currently operated by PT
\nCaltex Pacific Indonesia.<\/p>\n
The company will be jointly owned by the provincial
\nadministration and the administrations of Siak, Bengkalis
\nPalalawan and Kampar in whose areas the oil wells are located.<\/p>\n
The development followed a recent standoff when the local
\nadministration threatened to blockade the oil fields should the
\nJakarta deny them the opportunity to operate the resources. The
\nfact that the contract authorizing PT Caltex Pacific Indonesia to
\nexploit the \"black gold\" is expiring within a month, is adding to
\nthe tension.<\/p>\n
Joining the fray are companies jealously eyeing the bounty --
\nas more than 2 billion barrels of oil reserves are yet to be
\ntapped from under 30 fields and 300 wells.<\/p>\n
Riau demanded that it be given 70 percent equity stake in the
\njoint venture that will operate the CPP oil block. The government
\nturned this down, reiterating that Riau was entitled to only 10
\npercent.<\/p>\n
Governor Saleh Djasid recently vowed to continue the fight for
\na bigger share. The government has said its decision to give Riau
\na 10 percent stake in the CPP oil block is final; the remaining
\n90 percent stake would be held by Jakarta through state-owned oil
\nand gas company Pertamina.<\/p>\n
Under production-sharing contracts, oil companies receive only
\n15 percent of an oil block's entire production. In the case of
\nthe CPP oil block, the 15 percent share of its production will go
\nto the planned joint venture and the other 85 percent to Jakarta.<\/p>\n
Of the 85 percent, Jakarta receives 85 percent as stipulated
\nin the intergovernmental fiscal balance Law No 25\/1999; 15
\npercent of which will be allocated to the provinces where the oil
\nfields are located. So on top of the 10 percent Riau gets from
\nthe joint venture which would operate the CPP oil block, it will
\nreceive another 15 percent from the government's share.<\/p>\n
The government has said it plans to offer Riau incentives to
\ncompensate it for its small equity interest in CPP; these include
\nthe possibility for Riau to export the oil it gets from its stake
\nin CPP.<\/p>\n
All companies must now sell their crude oil and gas through
\nPertamina, which holds monopoly over oil and gas distribution.
\nOther incentives include the granting of three oil fields to Riau
\nas a \"training ground\" for the province's oil and gas industry.<\/p>\n
Caltex, a joint venture of American-based oil companies
\nChevron Corp. and Texaco Inc., is the country's largest oil
\nproducer, producing about 70,000 barrels of crude oil per day at
\nthe CPP oil block.<\/p>\n
The government had agreed in 1999 the reappointment of Caltex
\nand Pertamina to jointly operate the oil block but the decision
\nwas annulled after then president Abdurrahman Wahid unexpectedly
\nbowed to Riau's demand to take part in the management and
\noperation of the oil block.<\/p>\n
Riau's struggle for a bigger share intensified when Governor
\nSaleh Djasid set up a team three years ago to persuade Jakarta
\nand Pertamina to surrender the majority equity stake. Some Rp 700
\nmillion was spent for this particular team's fight, to no avail.<\/p>\n
A number of follow-up efforts by the Riau administration's
\nteam with Abdurrahman and other officials also flopped.<\/p>\n
Local legislators, including Chaidir, believe that it is now
\ntheir turn to take up the fight to win Riau the bigger share in
\nthe deal. Setting up yet another team of negotiators, they
\nappealed for support from formal teams and NGOs to secure their
\nclaim. The team's chairman, Thamrin Nasution, a Golkar Faction
\nmember, said \"we need quite a lot of money to fund our struggle
\nand the funds were derived from the routine budget, but we were
\nnot yet able to provide details on the amount needed.\" Reluctant
\nto give figures, he added \"each struggle requires a sacrifice.\"<\/p>\n
Thamrin said the CPP oil field management was a politically
\ntainted issue which must be addressed in a political and
\nbusiness-like manner. He attributed earlier failures to poor
\nnegotiation skills of the previous team. However, Thamrin's team
\nis also aiming for 20 percent of equity stake from the 85 percent
\nshare held by the central government.<\/p>\n
Thamrin said he was aware the 20 percent claim contradicted
\nthe oil and gas law, but promised to push ahead. He referred to
\nthe new fiscal policy, Law No. 25\/1999, which entitles provinces
\nto greater shares in natural resources management.<\/p>\n
\"The oil and gas law indeed makes it harder for us to
\n(control) the oil fields. So we are aiming for a presidential
\ndecree that will give us the right to manage the oil fields, that
\nis the bottom line,\" he said. Many here believe the fight is
\njustified, given the years of plundering of their natural
\nresources by Jakarta and other parties.<\/p>\n
Local legislative council (DPRD) speaker, Soeratno AD of
\nGolkar said \"Caltex pumps some 700,000 barrels of oil per day but
\nonly contributes Rp 3 billion annually to the local
\nadministration\". Last year, Caltex contributed US$4.5 billion or
\nRp 42.3 trillion to the state's coffers.<\/p>\n
The lucrative wells in the province have lured not only
\ninternational but also domestic companies. Old hands such as
\nKorean oil, Petronas Malaysia, China oil and Caltex, along with
\nnational entities like Petra oil, Medco (owned by Arifin
\nPanigoro), Setco (owned by Setiawan Djodi) and Kondur Petroleum
\n(Bakrie Brothers' group) are vying for the oil there.<\/p>\n
But when commenting on the possibility of Caltex's contract
\nbeing extended for another year, Soeratno said the Riau
\nadministration and DPRD could do nothing but accept the deal. \"We
\nwill fight again after the contract expires\" .<\/p>\n
A local public figure, Al Azar, said if the team failed in the
\nfight for their rights, they would resort to a blockade of CPP
\noil fields.<\/p>\n
\"It would be a lot better if we put the mining operation to a
\nstop; that is no bargaining,\" he said. \"Look how the Riau people
\nremain poor despite the fact that their land possesses such an
\nabundance of natural resources.\" Soeratno, however, frowned upon
\nthe threat, saying it would harm the people themselves.<\/p>\n
Of no less importance is that the fight for the oil fields
\nstraddling across Siak, Bengkalis and Pelelawan regencies, is
\nfast spreading. Each regency claims its rights over the oil.<\/p>\n
\"It is really funny that the local administration insists on
\nsecuring the CPP oil fields; it's the Siak regency that deserves
\nmost,\" Said Muhammad, the speaker of Siak regency said.<\/p>\n
Caltex has meanwhile acknowledged that their contract
\nextension was approved by Pertamina in mid-June 2001. Public
\nrelations officer Poedyo Oetomo said, \"as long as the fields are
\neconomically profitable, Caltex will bid for another term.\"<\/p>\n
The writer is a freelance journalist in Pekanbaru, Riau.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/riau-province-to-jointly-own-cpps-oil-block-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }