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)