Gus Dur offers Riau 20% in CPP oil block

JAKARTA (JP): President Abdurrahman Wahid wants the Riau provincial administration to only possess a 20 percent stake in a joint venture with state oil and gas company Pertamina to develop the Coastal Plains Pekanbaru (CPP) oil block in the province.

Riau governor Saleh Djasit told reporters on Thursday that the President, also known as Gus Dur, had told him during a recent meeting that a 20 percent stake in the project was enough for the province.

"The President has decided Riau will only obtain a 20 percent stake in the joint venture that will develop the CPP block," he was quoted as saying by Antara.

The provincial council and administration earlier demanded a 70 percent stake in the planned joint venture.

The province has been aspiring to control the oil block as the existing production sharing contract on the block, held by American oil and gas company PT Caltex Pacific Indonesia, expires in August this year.

Caltex initially requested an extension of its contract but later agreed to form a joint venture with Pertamina. But the organization backed down from the deal after learning that it could become a minority shareholder following the inclusion of Riau's provincial administration.

Pertamina's exploration and production director Gatot K. Wiroyudo said earlier that, in order to make the investment economically viable, Pertamina should own at least 90 percent in CPP's new joint venture.

When asked if the provincial administration accepted Gus Dur's proposal, Saleh said the province should feel privileged by the proposal, adding that the 20 percent stake was a "special right" offered to the province.

"Even though we are given only 20 percent, we could still acquire the rest through a bidding process if we are capable," he said.

Under the intergovernmental fiscal balance law No. 25/1999, which came into force on Jan. 1, the Riau administration will also obtain 15 percent of the government's share in the CPP block's oil output.

Under the production sharing system, the government takes 85 percent of the block's oil output, leaving the remaining 15 percent to the joint venture which will develop it.

Caltex, a joint venture of American-based oil companies Chevron Corp. and Texaco Inc., currently produces about 70,000 barrels of crude oil per day (bpd) from the CPP block. (tnt)