Pertamina and Caltex negotiations suspended

JAKARTA (JP): Current negotiations between state oil and gas company Pertamina and PT Caltex Pacific Indonesia over future operations in the Coastal Plain Pekanbaru (CPP) oil producing block, have been suspended following President Abdurrahman Wahid's decision to allow the Riau provincial administration to take over the block.

Minister of Mines and Energy Susilo Bambang Yudhoyono said on Wednesday that the negotiations would no longer be needed.

"The negotiation has lost its basis with the possibility of Riau owning the block," Bambang told reporters prior to a meeting of economic ministers at the Bina Graha presidential office.

The government asked Pertamina and Caltex to form a joint venture to operate the CPP block once Caltex's contract expires next year. The two companies have been engaged in talks since early last year to prepare the joint venture. But negotiations did not run as expected as both parties demanded the majority stake in the planned joint venture.

President Abdurrahman Wahid unexpectedly yielded to demands from Riau officials to control the block.

During his visit to the province last week, the President suggested Riau form a company to operate the block.

The statement came after Pertamina and Caltex had settled their differences and agreed to a 55-45 stake in the joint venture, respectively.

Bambang said that the share composition in the joint venture had yet to receive approval from the board of commissioners, which he chairs.

"At present, I have not given my definite approval," he said.

He said the final stakes of both companies in the CPP block would have to await clarification of Riau's participation in the operation.

"It's therefore highly likely that the latest share percentage will change," Bambang added.

He said during Tuesday's night meeting with Pertamina, the board of commissioners outlined several options to include Riau.

"We've discussed three to four options," he said, declining to elaborate further.

Bambang expects to discuss details of Riau's involvement with the President by Thursday.

It is unclear whether the President will grant Riau the entire block, but state secretary Bondan Gunawan earlier indicated that the province should join Pertamina and Caltex in a joint venture to operate the block.

"We'll further discuss this with the Riau provincial administration, Caltex and Pertamina," Bambang said, adding that the House of Representatives would also be included in the discussion.

Under the current oil and gas law, the joint venture would receive 15 percent of the oil revenue. The remaining 85 percent must be transferred to the government through Pertamina.

At present the CPP block produces about 70,000 barrels of crude oil per day (bpd).

Caltex is a joint venture of American-based oil companies Chevron Corp. and Texaco Inc. and currently operates four oil producing blocks in Riau: CPP, Rokan, Kuantan and Siak.

Caltex is the country's largest oil producer with a current output of 740,000 bpd, or 80 percent of Indonesia's total oil production. (bkm/prb)