Caltex wants government to extend contract

JAKARTA (JP): PT Caltex Pacific Indonesia has asked the government to extend its contract over Coastal Plain Pekanbaru (CPP) for at least one year to enable the oil giant to fully recover its investment in the oil field, the company's president Humayunbosha said on Tuesday,

Humayunbosha said that the extension of the contract, which is due to expire in August this year, was needed to give the company enough time to transfer the oil block's operations to the new contract-holder.

Caltex, a joint venture of United States-based oil companies Chevron and Texaco, had invested between US$10 million and $15 million to maintain CPP's output rate of between 50,000 to 60,000 barrels a day.

"We are asking the government to extend our presence there by one year or about 18 months," he said on the sidelines of an oil and gas conference organized by the Society of Petroleum Engineers.

CPP is one of four oil blocks operated by Caltex in Riau province under a production-sharing contract with state-owned oil company Pertamina. Production in the oil block reached a peak of about 70,000 barrels per day (bpd) several years ago but has since declined to its current level of between 50,000 and 60,000 bpd. Caltex's total oil production in the province is 700,000 bpd at present.

Humayunbosha said that although Caltex's contract over CPP would soon expire, the company had to keep investing to maintain the oil block's production rate.

"It's our moral responsibility, it wouldn't look good if production drops," he said.

Caltex's 30-year contract over the CPP oil block will expire next August, after which the company must transfer operations to state oil and gas company Pertamina.

According to him, newcomers will be unable to takeover Caltex's operation straight away without guidance from the company.

During the transition period, he said, Caltex might have to form a joint team with Pertamina under which both would operate the CPP oil block.

"For instance, there'll be a lot of discussion on how to allocate infrastructural operations. There'll be plenty of sharing," he said.

But he said that details of the operation's handover to Pertamina hadn't yet been discussed.

Humayunbosha said that environmental studies were also currently underway to assess the damage caused by Caltex's operations in the area surrounding CPP.

The study, he said, would take some time, and the company intended to restore the environment before leaving it.

"We'll make sure that we leave the area as clean as when we entered it," he said.

Caltex had made numerous appeals to have its production- sharing contract over CPP extended.

But legislators demanded Caltex's' contract only be extended if Pertamina was awarded a majority stake in CPP.

The decision prompted heated negotiations between Caltex and Pertamina as to the level of each company's stake in the oil block.

Caltex then decided to withdraw from negotiations, after the government also allowed Riau to have a stake in CPP.

The company believed that sharing its minority stake with Riau was unattractive.

Following Caltex's withdrawal, the government had agreed to transfer the operation of the CPP oil block to a joint venture between the Riau administration and Pertamina.

Riau had been allocated a 10 percent stake in the joint venture and the remaining 90 percent allocated to Pertamina. A presidential decree on the composition of each partner's stake has yet to be issued.(bkm)