Caltex urges government to extend its CPP contract

Caltex urges government to extend its CPP contract

JAKARTA (JP): PT Caltex Pacific Indonesia has appealed to the
government to reconsider its decision allowing state-owned oil
company Pertamina to take over the Coastal Plains Pakanbaru (CPP)
oil field in central Sumatra, Caltex president director B. Hakim
said yesterday.

Hakim said the government would lose US$2.1 billion in
potential additional revenues if Pertamina took over the CPP
field because the company had not mastered the enhanced oil
recovery (EOR) technology.

He said Caltex had sent a letter to Minister of Mines and
Energy I.B. Sudjana on July 7, asking for an extension of the CPP
contract until 2021 after it expires in 2001.

Caltex said it would be capable of producing 423 million
barrels from the oil field throughout the 20-year extension
period, including 250 million barrels as a result of the
application of EOR technology.

Hakim said Pertamina would not be able to produce such a
capacity as it had not mastered EOR technology.

"The government will probably lose an additional 250 million
barrels in oil production or $2.1 billion in additional revenue
due to the stoppage of the EOR technology," Hakim told reporters.

Pertamina's president Faisal Abda'oe told the House of
Representatives on Monday that he had notified Caltex on June 23
that Pertamina would take over and operate the oil field.

"Pertamina has the capability to operate the field, including
technology and funding," Abda'oe said.

Abda'oe said the government had rejected Caltex's request for
an extension of the CPP contract because Caltex had refused to
meet its request for a 10 percent equity share for Pertamina.

Stake

Hakim admitted that Caltex had been willing to give only a 5
percent stake.

Caltex argued that the contract signed by Pertamina and Caltex
in 1971 did not include an obligation to give Pertamina a 10
percent equity.

Caltex considered Pertamina's condition unfair because the
government had extended the contracts of other oil companies
without requiring them to give Pertamina equity shares.

"What, then, is the benefit of Caltex maintaining a good
performance if Pertamina does not extend our contracts but
extends the contracts of others which have performed worse?"
Hakim queried.

He added that many foreign oil investors felt uneasy over
Pertamina's treatment of Caltex.

Caltex, jointly owned by Chevron Corp. and Texaco Inc.,
currently exploits four blocks in Riau: CPP, Rokan, Mount Front
Kuantan and Siak fields. The latter three contracts had all been
extended.

The CPP field produces 77,000 barrels per day or 10 percent of
Caltex's total gross output of 770,100 barrels per day.

Hakim said Caltex's production accounted for 45 percent of
Indonesia's total oil output, but it contributed 88 percent to
the government's revenue from the oil sector.

"The percentage of our contribution to government's revenue is
bigger than the percentage of our production because we have the
lowest production cost of $3 per barrel," Hakim said. (jsk)