Direct management of Riau oil field denied

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)