Govt in favor of extending Caltex deal

Govt in favor of extending Caltex deal

JAKARTA (JP): It is possible the government will approve PT
Caltex Pacific Indonesia's request for a short extension of its
contract on the Coastal Plain Pekanbaru (CPP) block in Riau to
allow it to fully recover its investment in the block, according
to a senior government official.

The Ministry of Energy and Mineral Resources' director general
for oil and gas, Rachmat Sudibyo, said on Friday he was in favor
of extending Caltex's contract.

While Caltex's contract for the CPP block expires soon, he
said, its successors were unprepared to take over just yet.

"It is only natural that the contract be extended," Rachmat
said.

Caltex, whose 30-year contract for the CPP block expires in
August this year, has said it wants to extend the contract by at
least one year.

The company argued that it needed time to fully recover the
US$10 million to $15 million investment it had made to maintain
CPP's oil output at the current rate of 50,000 barrels to 60,000
barrels per day.

The government has named state oil and gas company Pertamina
and a company owned by the Riau provincial administration to take
over Caltex's CPP operation under a joint venture.

The transition process has, however, been stalled because
Pertamina and Riau are awaiting the government's decision on the
ownership composition of the joint venture.

The Ministry of Energy and Mineral Resources has proposed that
Pertamina be allotted a 90 percent stake and Riau 10 percent.

But thus far, a presidential decree to approve the share
allocation has not been issued.

"Extending the contract for, let's say, a year, would be the
most realistic solution," Rachmat said.

He said that Caltex's proposal to extend its contract was
currently under evaluation by Pertamina.

Pertamina will then forward the proposal to the government for
approval.

Aside from concerns over investment returns, Caltex president
Humayunbosha said that environmental studies at the CPP block
were still under way.

He said it would take some time for Caltex to assess any
environmental damage around the CPP operation.

More time is needed to repair any damage that may have
occurred, he explained.

In a statement, he said it was a normal industry practice to
document the environmental status of a working area at the time
of its transfer.

He further said that Caltex was still interested in operating
the CPP block.

Before the government had considered Pertamina's and Riau's
stakes in the block, Caltex had made numerous appeals to the
government to extend its contract.

Humayunbosha said that Caltex had temporarily withdrawn from
the negotiations on the management of the block, as the
negotiations had entered a phase of internal dispute between the
central government and the local government of Riau.

"We will, of course, seriously consider any commercially or
economically attractive option involving our continued
participation in the CPP, should one be offered," he said.

Caltex, a joint venture between American oil and gas companies
Chevron and Texaco, is Indonesia's largest oil producer with an
output of around 700,000 barrels per day. (bkm)