Caltex wants government to extend contract

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)