Direct management of Riau oil field denied

JAKARTA (JP): Oil analysts affiliated with the so-called Group of 20 expressed opposition on Tuesday to the Riau provincial administration being given the option of managing the Coastal Plains Pekanbaru oil field.

Ramses O. Hutappea, the coordinator of the group, warned during a hearing with the House of Representatives that the option, put forward by the central government, could revive the individual rights of members of the former Riau sultanate.

"The option may prompt the members of the former Riau sultanate to reclaim their rights to the resources (in the province), and this could cause chaos to the property rights regarding natural resources," Ramses said during a hearing with House Commission VIII for mining and energy affairs.

The Coastal Plains field currently is operated by PT Caltex Pacific Indonesia. The field produces about 70,000 barrels of oil a day and is part of Caltex's wider operations in the Riau province.

President Abdurrahman Wahid has approved Riau's direct management of the field when Caltex's contract expires in August, 2001. This decision is seen by analysts here as a bid to placate rising provincial demands for greater control of their natural resources.

But many analysts worry such a step could discourage foreign investment in natural resource development because direct management by local governments could introduce another level of bureaucracy to business operations.

Ramses, therefore, urged the central government and the Riau administration to look for better options for the management of the oil field after August 2001.

He cautioned that the uncertainty ahead of the expiration of the Caltex contract in August 2001 already had negatively impacted the field's operations, evidenced by the decline of its daily output from 70,000 barrels earlier this year to 55,000 barrels at present.

Commenting on the view of the oil analysts, the deputy chairman of the commission, Tubagus Haryono, said the House only supported allowing the Riau administration to participate in the management of the Coastal Plains oil field.

"Our approval is related only to participation in management, not to a complete takeover," Tubagus asserted.

"Our recommendation only allows the Riau administration to take part in the oil field's management under the condition that the field's daily operations remain in the hands of professionals and a competent management," Irwan Praiytno, chairman of the commission, was quoted as saying by Antara.

Irwan said he did not fully agree with the Riau administration's argument that technology and managerial competence for the Coastal Plains oil field could be bought. He also doubted the capability of the company the Riau administration set up to handle the management of the oil field.

"This completely new company obviously cannot match the capability and experiences of Caltex, which succeeded in developing the Coastal Plains oil field to a daily production capacity of 70,000 barrels," Irwan said.

Moreover, Irwan added, there is not a single regional administration-owned company that has yet proven itself capable of developing and operating an oil field. (vin)