House backs govt plan to review oil contract

House backs govt plan to review oil contract

JAKARTA (JP): Legislators have thrown their weight behind the
government's move to review former president Soeharto's decision
allowing state oil and gas company Pertamina to develop the
Coastal Plains Pekanbaru (CPP) oil field in Riau after PT Caltex
Pacific Indonesia's contract expires in 2001.

FX Soejitno of the Armed Forces (ABRI) faction and Djusril
Djusan of the ruling Golkar -- both members of House of
Representatives' Commission V with jurisdiction over mine and
energy affairs -- said the government needed to reevaluate
Pertamina's capability to develop the field amid charges it is
inefficient and wracked by financial problems.

"Honestly speaking, I doubt Pertamina's ability to develop the
field given its inefficiency and muddled condition," Djusril
said.

Although Soejitno defended Pertamina and said it was not as
shoddy as Djusril claimed, he argued the company would have to
show its ability to develop the field before.

Soeharto awarded Pertamina the contract last year, rejecting
Caltex's efforts to extend its contract for another 20 years.

Minister of Mines and Energy Kuntoro Mangkusubroto recently
said the government would possibly revoke Soeharto's decision if
Pertamina lacked the financial and technical resources to carry
on the development.

He said the government had three alternatives for the
development of the field after 2001.

He explained they were for Pertamina to be given the rights to
develop the field, the extension of Caltex's contract or for
Pertamina and Caltex to jointly develop the field.

"For me, it does not make any difference whether Pertamina or
Caltex develops the project. The most important thing for me amid
the monetary crisis is how to secure the government's income from
the oil field."

The CPP field currently produces 70,000 barrels per day (bpd)
and analysts say Pertamina needs to install enhanced oil recovery
(EOR) technology to maintain the production level. The equipment
costs about US$1.3 billion.

Pertamina's president Soegianto insisted Pertamina was able to
develop the field and the company would ask the government to
hold to Soeharto's decision.

"Who says we are not able (to develop the field)?" Soegianto
said. "Money is a small thing. We have the money and technology."

He did not elaborate on how Pertamina would raise financing to
install the EOR technology amid the crisis and the company's
acknowledged cash-flow problem.

Pertamina said earlier it had applied EOR technology in some
of its fields and it also had dozens of engineers who had been
trained in the technology by the United States' Chevron Corp and
Texaco Inc, which co-owns Caltex.

Djusril urged the government to apply strict conditions for
Pertamina to develop the CPP field, including that Pertamina
should demonstrate better performance than Caltex.

"If Pertamina does not perform better than Caltex, don't let
it develop the field."

Djusril argued that the government should involve the House in
deciding who received the CPP contract.

In contrast, Soejitno said the government should apply lenient
conditions for Pertamina to meet to qualify to develop the field.

He said Kuntoro should not focus on immediate benefits of
securing earnings from the field, but instead consider the long-
term goal of empowering a national company such as Pertamina to
reach international standards in the future.

"Pertamina might not be able to perform as well as Caltex.
But, by allowing it to operate the field, the government gives
the nation's heirs the chance to learn how to handle a
multibillion dollar oil field," Soejitno said. (jsk)