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)