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)