Local firms to get better chance in oil industry

Local firms to get better chance in oil industry

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto said on Friday his office would give local
companies a better chance to develop the country's oil and gas
reserves.

The minister said that existing operators' contracts which had
expired could be offered to local companies.

"I want my fellow countrymen to be able to handle (the
development of) the country's (oil and gas) fields so much,"
Kuntoro said at a weekly press conference.

He, however, stopped short of saying whether all the country's
oil and gas fields would be put out to tender after the contracts
expire.

The government formerly, through state oil and gas company
Pertamina, in most cases allowed oil and gas contractors to
extend their contracts, with most lasting up to 30 years.

But, analysts say, the current difficulties faced by PT Caltex
Pacific Indonesia, a joint venture of the United States giant
energy companies Chevron and Texaco, to extend its contract on
the Coastal Plain Pekanbaru (CPP) oil block in Riau has sent a
signal to oil and gas contractors that contract extensions can no
longer be taken for granted.

"The easiest alternative is extending every contract. But,
what will happen? Our people will remain backward in the oil and
gas industry," Kuntoro said.

The country's oil and gas industry is dominated by foreign
firms.

Kuntoro said the government had been inclined to extend the
contracts held by foreign contractors in the past because
Pertamina and local companies were not ready to take over the oil
and gas fields after the contracts expired.

The government had no other choice but doing that to maintain
continuity of production and secure flow of income from oil and
gas operations.

"We were always in a disadvantageous situation so we were more
inclined to let the contractors extend their contracts," Kuntoro
said.

Caltex

Kuntoro also said the government had created a task force
consisting of officials from several ministries, including the
Ministry of Mines and Energy, the State Secretariat and the
Ministry of Finance, to choose the best alternative for the
development of the CPP block.

"The team is expected to give their answer to me by the end of
the month," Kuntoro said.

Kuntoro said the task force was pondering four alternatives
for the development of the oil block: either Caltex or Pertamina
would develop the block; they will cooperate in developing the
block or it would be put out to open tender.

Former president Soeharto last year allowed Pertamina to take
over development of the block after Caltex's contract expires in
2001.

But the new government, which is in dire need of income from
oil operations in the block, recently reviewed Soeharto's
decision over doubts about Pertamina's financial capability to
develop the block's mature oil fields.

Pertamina reportedly needs huge investments to install
advanced enhanced oil recovery (EOR) technology in the block to
maintain its current production rate of 77,000 barrels per day.

Caltex claims to have mastered EOR technology, but Pertamina
insists it would not face any difficulties raising the funds to
install the technology.

The CPP Block is estimated to have a reservoir of 423 million
barrels which is enough for 20 years of production at the current
rate. (jsk)