Pertamina-Caltex clash causes ripples: Analysts

Pertamina-Caltex clash causes ripples: Analysts

SINGAPORE (Reuter): A decision by state oil company Pertamina to take over a crude field operated by Caltex -- Indonesia's most prolific producer -- is unlikely to represent a major policy change, industry sources said yesterday.

"It may cause a little shudder, but it's not a major blow," said an analyst.

"This is not the first time that Pertamina has decided to take over a field, although in the past they have been much smaller fields. But I don't think it is a signal that Pertamina will take over every field that comes up for extension," said a producer in Indonesia.

But the decision was likely to sour relations between Caltex and Pertamina, especially as the U.S. oil group produces half the OPEC country's 1.59 million barrels-per-day (bpd) output. Historically, the relationship has been close, industry sources said.

Pertamina said on July 23 it would take over the Coastal Plain Pakanbaru (CPP) block in 2001 when the 30-year contract of the operator -- Caltex Pacific Indonesia -- ran out.

Caltex, equally owned by U.S. oil giants Chevron Corp and Texaco Inc, operates four production sharing blocks that produce mainly heavy sweet Minas and Duri crudes.

The CPP block produces 77,000 barrels per day (bpd) of Minas. Contracts to operate the three other blocks, including the 695,000-bpd Rokan Block, were renewed for 30 years earlier in the 1990s.

Industry sources said the exact reasons for Pertamina's new move remained unclear. The decision was unexpected, but did not break the terms of the contract.

"Pertamina has every right to take over the field when it expires. Caltex probably took it for granted that it would receive an extension because of its close ties with Pertamina," said one analyst who declined to be named.

The Pertamina decision sparked an unusually public response from Caltex, which said it doubted Pertamina's ability to fully exploit the block's potential on its own.

The Caltex production system is one of the most sophisticated in the world and relies on enhanced recovery techniques and heavy funding to keep oil flows going. Pertamina replied that it was capable of handling the fields.

"We regret the Caltex president's statement that Pertamina will not be able to operate the field," Pertamina exploration director Priyambodo Mulyosudirjo told reporters last week.

The decision will certainly boost Pertamina's asset base, critical if the company eventually privatizes in line with the deregulation of the oil sector that is sweeping Asia.

"Pertamina has previously said that it wanted to increase its participation in the upstream," said an analyst in Indonesia.

"The Caltex block still has a lot of reserves, so this is probably why they want to take over the development," she added. Industry sources said the Caltex move appeared to be an isolated case because Pertamina has renewed most production sharing contracts in recent years.

Blocks operated by VICO, Total SA and Mobil Corp were all extended.

Indonesia has also operated a steady policy on production sharing with foreign partners, building up a good track record with the industry.

"When you sign a contract in Indonesia, the terms specified in the contract are stuck to rigidly. This contrasts with somewhere like maybe the U.K., when tax terms are constantly changing," said a European analyst.

So longer term, industry sources said they doubted the Pertamina/Caltex spat would change the perception for investment in oil exploration and development.

Producers have not reassessed their positions or investments as a result of Pertamina's decision. Caltex is appealing, and that could produce a more amicable result, they said.