Government mulls including Riau in CPP project

Government mulls including Riau in CPP project

JAKARTA (JP): Riau may become joint owner and developer of the
Coastal Plains Pekanbaru (CPP) oil block with state oil and gas
company Pertamina and PT Caltex Pacific Indonesia, an official
said on Tuesday.

Minister of Mines and Energy Susilo Bambang Yudhoyono said the
government was considering allowing the provincial administration
of Riau to take part in the development of the block. The local
government recently demanded total control of the oil block after
Caltex's contract expires in 2001.

Bambang said that while the province wanted total ownership of
the block, the government could not bow to that demand.

"I've heard their demands, but the House of Representative
demanded Pertamina own the majority stake in the CPP oil block,"
Bambang said after a hearing with House Commission VIII for mines
and energy.

While Riau has demanded ownership of the block, Pertamina and
Caltex have been negotiating their respective shares in the
block.

Following a House recommendation in 1998, the government has
decided to transfer ownership of the block to a joint venture of
both companies after Caltex's production sharing contract expires
in August 2001.

The government called on Pertamina and Caltex to negotiate the
ownership of the shares.

"Because Pertamina is still in negotiations with Caltex, we
can at present only consider the possibility of Riau joining the
CPP ownership," he said.

Bambang said the government would evaluate the feasibility of
Riau owning a stake in the oil block. He also said he would
evaluate the possibility of Riau fully owning the oil block, but
added that this would be in violation of the House's decision.

"We must comprehensively study Riau's financial, managerial
and technical capabilities," he said.

Bambang further said the government expected Pertamina to have
a significantly higher stake in the oil block than Caltex.

Earlier, Pertamina proposed dividing the block 65 percent for
itself, with the remaining 35 percent going to Caltex.

But Caltex demanded a fifty-fifty split, leading to a
stalemate in the negotiations for months.

However, the ministry's director general for oil and gas,
Rachmat Sudibyo, said Pertamina had lowered its demand to 60
percent, giving Caltex the remaining 40 percent stake in the oil
block.

"I think Pertamina has shown goodwill to end the deadlock. It
is now up to Caltex to respond," Rachmat said.

Rachmat stated the government would not interfere in the
negotiations, saying Pertamina had been mandated to reach an
agreement with Caltex.

"We expect the negotiations to end by the end of February," he
added.

The CPP oil block's present production output reaches about
70,000 barrels per day, while Caltex, the country's largest oil
producer, has total production of 750,000 barrels per day.

Caltex, a joint venture between U.S. oil companies Chevron
Corp. and Texaco Inc., currently operates four oil blocks in
Riau: CPP, Rokan, Mount Front Kuantan and Siak. (03)