Pertamina agrees to involve Riau in joint venture

JAKARTA (JP): President of state-owned oil and gas company Pertamina Baihaki Hakim supports the government's move to allow the involvement of the Riau provincial administration in its oil production activities.

Baihaki said on Monday any concessions to be granted to the province should be in line with the existing oil and gas law, in which all oil and gas production activities in the country are operated under a production sharing contract with Pertamina.

Baihaki warned that allowing Riau full control over its oil resources would set a bad precedence for the country's oil industry.

Responding to Riau's demand to take over the Coastal Plain Pekanbaru (CPP) oil block, Baihaki said it would be better for the provincial administration to form a partnership with Pertamina and Caltex rather than establish its own company.

President Abdurrahman said last Saturday that Riau was entitled to run the oil block after Caltex Pasific Indonesia's contract to do so expired in August, next year.

"Pertamina is allowed to involve Riau in its planned joint venture with Caltex to take over the CPP oil block," he told a media conference.

Following a House of Representative's recommendation in 1998, the government decided to transfer CPP's management to a joint venture by Pertamina and Caltex.

The joint venture plans to operate the oil block under a production sharing contract with Pertamina, in which it will keep 15 percent of its earnings, while the rest will go to Pertamina on the behalf of the central government.

The two companies have since been engaged in negotiations over the joint venture's ownership but with no results so far, as both have insisted upon a majority stake in the company.

Baihaki said at present Pertamina and Caltex had already agreed to share the oil block, with a 55 percent to 45 percent split respectively.

In a recent visit to the province, the President, however, told Pertamina to halt its negotiations with Caltex. He did not indicate whether it should cancel the talks altogether.

Baihaki said that the Minister of Mines and Energy Susilo Bambang Yudhoyono had instructed him to study the possibility of Riau's involvement.

According to Baihaki, Pertamina was only seeking the best for the country, in which the provincial administration of Riau was a part of.

"The point is, what ever serves the country best," he said.

Legislator Irwan Prayitno, meanwhile, rebuffed Abdurrahman's statement and described it as spontaneous and not helpful.

"He made a responsive statement to Riau's demand that doesn't solve anything," Irwan who is head of House Commission VIII for mines and energy, said to The Jakarta Post.

Irwan suggested Riau be included in the joint venture without operating the oil block directly.

"It is not the job of the provincial administration to operate oil blocks," he said.

According to him, the province should simply enjoy the results and let professionals like Pertamina and Caltex do the job.

At present the CPP oil block produces some 70,000 barrels of crude oil per day (bpd). Caltex still operates the block.

Oil production from Caltex, a joint venture of America-based oil companies Chevron Corp. and Texaco Inc., makes up some 80 percent of the country's total output or about 740,000 bpd. (bkm)