Caltex renews hope after a gloomy year 2000
Caltex renews hope after a gloomy year 2000
By Berni K. Moestafa
JAKARTA (JP): Bruised by conflicts with locals and labor,
entangled in a political tug-of-war between the local and the
central government, Indonesia's largest oil and gas company takes
a look back at an eventful year 2000.
"The year 2000 wasn't exactly our best year, no, it wasn't
smooth sailing," president of PT Caltex Pacific Indonesia,
Humayunbosha said in an interview with The Jakarta Post.
Frequent unrest eroded Caltex's average production level to
710,000 barrels of oil per day (bpd) from its target of 740,000
bpd.
However, he said his company had worked hard to get where it
was now and was undeterred by the ongoing crisis.
Caltex's hope was fueled by the continued support of its
shareholders, employees and partners, Humayunbosha said.
"We have been operating here for 70 years and have passed
difficult times in Indonesia. If we do our best we'll be fine,"
he said.
Located in the province of Riau, Caltex was founded in 1936 by
the American oil companies Chevron Corp., formerly known as
Standard Oil of California, and The Texas Company Inc. (Texaco).
The company accounts for about 40 percent of Indonesia's total
crude oil production.
Humayunbosha, who joined Caltex in 1974, said that the company
contributed some 50 percent of the country's oil revenue.
But Caltex has come under the media spotlight due to a
multitude of problems ever since the downfall of former president
Soeharto in 1998.
His resignation followed a general break down of law and order
that surfaced long withheld resentments against foreign oil and
gas or mining companies.
Being the country's largest oil producer, Caltex was one of
the first to feel the sting of the reform euphoria.
In December 1998 and in June the year after, workers of one of
Caltex's major subcontractors went on strike and disrupted the
company's operations.
In April 1999, some 1,500 students demonstrated before a
housing complex belonging to Caltex, after the company dismissed
their demand that the province be given a 10 percent share of its
revenue.
But in late 1999 when the country's first democratically
elected president, Abdurrahman Wahid, took office, expectations
ran high that Indonesia was nearing the end of its crisis.
His election came amid growing cries for independence in the
country's far flung provinces of Aceh and Irian Jaya. Other
provinces joined the clamor, including Riau.
Then, in January this year, police injured at least 10
students when it broke up a sit-in at Caltex's office during a
protest against the company.
Caltex turned down the students' demand to shut down its
operations for three days in observance of the Riau People's
Congress.
Up to November, Caltex's production dropped by between 15,000
bpd and 20,000 bpd following a blockade of several of its oil
rigs by job seekers whose applications had been rejected.
Weeks later, a group of farmers set fire to four of Caltex's
oil wells in the Bengkalis regency, which temporarily halted
production.
The farmers were believed to be disappointed by Caltex's
unwillingness to pay compensation for their land because their
were deemed as not eligible.
Still in November, some 3,000 workers of Caltex's contractors
went on strike again.
Caltex claimed it had lost an average of 30,000 bpd due to the
unrest.
"This is not Indonesia's real face," said Humayunbosha, "if
the country is sick, everyone is affected."
He said that in conditions like these, adaption was the key to
survive in the country.
As an illustration, Texaco has proven capable of operating
under a dictatorial leadership in one of Africa's countries as
well as under a highly democratized country such as the U.K., he
explained.
Caltex's shareholders, he said, remained committed to
Indonesia, unless conducting business here became unfeasible.
"If political risks run too high, it is best to invest the
money in other safer places," he said.
The frequent run-ins with the locals also prompted the company
to improve its relations with them, according to him.
Caltex's community development program, he said, must give
stronger emphasis on building relations.
Although the company has helped Riau build its infrastructure,
such physical contributions were not a priority in the company's
community development program.
Unfortunately, he said, people placed more value on money and
material objects these days.
"Our employees' wives teach at their schools, but they (the
locals) don't see that as a contribution," he said.
The company, he said, did not value a project by its costs,
but by the benefits it could bring to the local community.
"If our community development is only in the form of charity,
people will soon think that it's their right," he said.
According to him, a company's obligation is defined by ethical
business practices and its compliance in paying taxes.
"Community development is what sets apart one company from
another. Only if companies are able to make profits can they
afford community development programs," he explained.
Politicking
Humayunbosha further complained certain local politicians, who
took advantage of the locals' resentment against Caltex.
The ownership of one of Caltex's oil fields, has also been the
center of a political dispute between the local government of
Riau and the central government as well.
Caltex's production sharing contract over the Coastal Plain
Pekanbaru oil field (CPP) will expire in August next year.
At present, the company, the state-oil and gas company
Pertamina and Riau are all vying to control the block.
Initially, in 1998 the central government instructed state-
owned oil and gas company Pertamina to form a joint venture with
Caltex for the operation of the oil block.
An intense negotiation followed to determine the two
companies' respective stake in the joint venture; but Riau began
its own lobbying.
Pertamina and Caltex were about to reach an agreement on a 55
percent and 45 percent share in the joint venture, when President
Abdurrahman bowed to pressure from Riau.
To the dismay of both companies, the province was given the
green light to participate in the oil block's development.
The president's unexpected move disrupted plans for the
transition of the ownership of CPP.
Months of indecision ended, when the government chose
Pertamina to own a majority stake in the joint venture.
Yet this decision almost effectively ousted Caltex from the
CPP oil block.
Humayunbosha said he understood the province's wish for
recognition of its natural resources. "Though to investors, this
all appears like efforts to nationalize (the oil block),"
Humayunbosha said.
In 2005, he said, Caltex's contract over the Mountain Front
Kuantan oil block would also expire.
"What will happen then? Can we still operate the oil block? If
not, why should we continue investing there?" he said.
He said that the company must continuously invest in their oil
fields to at least maintain their production level.
"Otherwise, we can just become oilplumbers; and that's very
simple, anyone can do that," he said.
A sign of Caltex's commitment was that its five-year business
plan remained unchanged despite the prevailing crisis, he went
on.
According to him, the company will spend $450 million annually
for the next five years for its operations.
"This is an achievement in a crisis situation like this," he
said of Caltex's shareholders who had refrained from revising the
five-year budget plan.
At present, Humayunbosha said, the company's investment focus
was on drilling more oil from its existing fields.
The Minas oil field, which is the largest oil field ever
discovered in Southeast Asia, contains another four billion
barrels of oil since drilling there began in 1944.
The Duri oil field has an additional five billion barrels of
oil since the first drilling started in 1941.
"If we can extract just one percent of all of that, it would
already be more than enough," he said.
Caltex plans to produce a total of six to seven billion
barrels of crude oil within the next 25 years, using enhanced oil
recovery technology.
The biggest challenge for next year, Humayunbosha said, was
the "classic" challenge of maintaining oil production level.
Humayunbosha also placed hope on the implementation of
regional autonomy in January next year.
According to him, the implementation of regional autonomy
would help improve the relations between Caltex and the people of
Riau.
"This is a chance to improve relations and understand each
other," he said.
With the implementation of autonomy, the government hopes to
empower regions by granting them greater autonomy to manage their
own affairs, including their economies.
"If needed, we are there to help," Humayunbosha said.