Megawati extends Caltex oil contract for one year

JAKARTA (JP): President Megawati Soekarnoputri has issued a decree extending the contract of PT Caltex Pacific Indonesia over the Coastal Plains Pekanbaru (CPP) oil block in Riau for one year following a lingering dispute between the central and Riau governments over stakes in the oil block.

Outgoing Vice Presidential Secretary Bambang Kesowo said on Friday that the extension was ordered to allow the government and the Riau provincial administration to resolve their dispute.

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

"This step is being taken so that by the time the extension is over there would be an acceptable stake split," he said.

A disputes has flared between Jakarta and Riau over how big a stake each party should control in a new joint venture that is to be established to manage the CPP oil block after the American oil and gas firm's contract expires.

Riau is demanding that it be given a 70 percent stake in the new joint venture while the government is only willing to give 10 percent. The remaining 90 percent would be controlled by Jakarta through the state-owned oil and gas company Pertamina.

The government had agreed in 1999 to allow Caltex and Pertamina to jointly operate the oil block but the decision was annulled after president Abdurrahman Wahid unexpectedly bowed to Riau's demand to take part in the management and operation of the oil block.

Riau's struggle for a bigger stake intensified when Governor Saleh Djasid set up a team three years ago to persuade Jakarta and Pertamina to surrender the majority equity stake. But, the team's efforts have thus far been to no avail.

The administration last month planned to establish a joint venture company, Riau Petroleum, to further pressure Jakarta into letting it control the oil block.

The company will be jointly owned by Riau, and the province's Siak, Bengkalis Palalawan and Kampar regencies where the oil wells are located.

It is estimated that the CPP oil block holds more than 2 billion barrels of oil reserves in its 30 fields and 300 wells.

The government has said it plans to offer Riau incentives to compensate it for its small equity interest in the CPP. These include the possibility of Riau exporting its oil allocation by itself.

Bambang Kesowo also said that the President has signed government decrees on the debt restructuring of two state-owned companies, power company PT PLN and port operator PT Pelindo.

The decrees were a follow-up to the government's decision taken at a limited Cabinet meeting on the economy in June, he said, but he did not elaborate.

The government agreed that month to the restructuring of PLN's Rp 34.07 trillion (about US$3.5 billion) debt to help it stay afloat.(tnt/dja)