Govt upholds decision on CPP oil block

Govt upholds decision on CPP oil block

JAKARTA (JP): The government will not cancel its recent
decision to extend the contract of PT Caltex Pacific Indonesia
(CPI) over the management of the Coastal Plains Pekanbaru (CPP)
oil block in Riau despite strong protest from local people,
secretary general of the Ministry of Energy and Mineral Resources
Djoko Darmono said on Monday.

Djoko said that the extension of the contract was crucial to
ensure continuity.

"Production will stop if no operator exist," he said, adding
that only CPI has the capability to operate the CPP block for
now.

Djoko was speaking to reporters following a closed-door
meeting with Minister of Energy and Mineral Resources Purnomo
Yusgiantoro, president of state-owned oil and gas company
Pertamina Baihaki Hakim, president of CPI Humayunbosha as well as
top officials from National Police.

Purnomo declined to give any comments.

The meeting was held following a weekend rally by more than
200 people in Pekanbaru, Riau, who threatened to blockade the CPP
oil block unless Jakarta review the decision.

President Megawati Soekarnoputri issued a decree last week
extending the contract with Caltex over the CPP oil block for one
year.

Caltex's production-sharing contract for the oil block expires
on Aug. 8.

Some have said that the protest by the people of Riau might
escalate into major regional opposition against the government of
Megawati, creating new political uncertainty.

The people of Riau have long demanded a controlling 70 percent
stake in the CPP oil block once the CPI contract expires. But
Jakarta has said that Riau neither has the necessary resources
nor the technical skills to fully manage the CPP block.

Riau has formed a company called Riau Petroleum, whose board
of commissioners include retired army general Syarwan Hamid, who
orchestrated the ousting of Megawati from her political party in
1996 during former president Soeharto's era.

The weekend gathering of Riau people, in which local
politicians and informal leaders participated, demanded that the
central government annul or review the decision to accommodate
the province's interests.

They said that if Jakarta decided to extend the CPI contract
for another year, Riau should be entitled to 30 percent of the
net profit from the oil block and CPI should employ more local
people in the block's operations.

The protesters gave Megawati three days to revise the decision
or they would launch a blockade starting Thursday, the
anniversary date of the province.

CPP is one of four oil blocks operated by CPI in Riau province
under a production-sharing contract with state-owned oil company
Pertamina.

CPI's total oil production in the province is 700,000 barrels
of oil per day (bpd) at present, making the company the largest
oil contract in Indonesia.

Several years ago, the CPP block produced around 70,000 bpd,
but the current production level has dropped to 50,000 bpd after
CPI decided to halt new investment last year due to growing
uncertainty over the future ownership of the oil block.

Pertamina president Baihaki Hakim said that the decision to
extend the CPI contract was crucial to ensure government revenue
of around US$260 million from the CPP oil block.

Baihaki said that central government would hold a meeting
today (Tuesday) with the Riau provincial administration over the
dispute.

He admitted the government had no other choice but to lengthen
the CPI contract because Pertamina was so far unable to take over
CPP production due to its lack of skilled human resources.

An expert at the Ministry of Energy and Mineral Resources,
Kardaya, said if CPP block production was halted, next year's
operation of the block would face difficulty in pumping oil at
its current level.

"Technically, if production is stopped, the oil will become
lumpy. That will make it difficult to pump," he said.

Meanwhile, Humayunbosha said that CPI would proceed with its
rate of oil production from the CPP block following the extension
of the contract given by the government.

He said Caltex, a joint venture of United States-based oil
companies Chevron and Texaco, had allocated about $8 million in
new investment this year to maintain the rate of production at
the CPP block.

As a result of the extension, Humayunbosha said, Caltex would
secure revenue of about $30 million this year.

Kardaya said that Caltex had promised to channel about $15
million from its revenue to help community development
surrounding the CPP block.(05)