Mon, 21 Aug 2000

No approval yet for Riau on CPP oil block

JAKARTA (JP): The government is still waiting for a concrete proposal from the province of Riau before allowing it to take over the Coastal Plain Pekanbaru (CPP), one of four oil blocks currently operated by PT Caltex Pasific Indonesia.

Director general of oil and gas at the Ministry of Mines and Energy Rachmat Sudibyo said here on Saturday that he expected the Riau administration would submit a new proposal by the end of this month.

The government, he said, initially expected the proposal by Aug. 1, or exactly one year before the contract, which is now held by Caltex, expires in August, 2001.

"The ideal deadline would be Aug. 1 so that we have a full year's transition period," Rachmat told The Jakarta Post over the weekend.

He said thus far, the province failed to meet the schedule, but he expressed confidence that the proposal was nearing completion.

In 1998, the government instructed state oil and gas company Pertamina and Caltex to form a joint venture to operate the oil block once Caltex's contract expires in 2001.

But bowing to demands from Riau, President Abdurrahman Wahid intervened and ordered the province be included in the development of the oil block.

The government first suggested three options that would see Riau either team up with Caltex, or with state oil and gas company Pertamina, or establish a joint venture with both companies.

Riau, however, rejected the three options in favor of choosing its own partner.

The province's fourth option was approved by the government under the condition that it was capable of submitting a feasible proposal.

"At present we haven't changed our position and the four options remain," Rachmat explained.

Riau Governor Saleh Djasid said the province had submitted a proposal on June 2, which the ministry turned down, however, dismissing it as too brief and demanding a more detailed plan.

According to the ministry, the proposal should contain all aspects needed in managing the CPP oil block, such as financial backing and the province's potential partners in operating the oil block.

The governor said many oil companies were interested in becoming Riau's partner and he further dismissed worries that the province lacked funding to operate the oil block.

He said investors were lining up to finance future developments in the oil block, which he estimated would cost the province about US$50 million.

Meanwhile, a local newspaper reported that the government had given its final approval to the province to operate the CPP oil block. But Rachmat denied the reports.

"We haven't issued anything yet," Rachmat said.

He said Riau and its potential joint venture partners, including Pertamina, were still negotiating possible partnerships in operating the oil block.

He said the government was waiting for the outcome of the negotiations before issuing a final approval to the province.

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) at the CPP block.

The company operates a total of four oil blocks in Riau, making it the country's largest oil producer with a total output of some 700,000 bpd, or over 50 percent of the country's total oil production. (bkm)