Pertamina-Caltex joint operation gets govt support

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto has endorsed a joint operation by state oil and gas company Pertamina and PT Caltex Pacific Indonesia in exploiting the Coastal Plains Pekanbaru (CPP) block after 2001.

Kuntoro confirmed in a weekly media conference on Friday that a cross-ministerial task force -- composed of officials from the ministries of mines and energy, finance, state secretariat and national development planning -- had recommended that the block be jointly developed by the two firms after Caltex's contract on it expires in August 2001.

Asked if he abide by the team's recommendation, Kuntoro, who will make the final decision, replied: "Why would you bother setting up a team if you won't take its advice?"

But he said he would consult with President B.J. Habibie and the House of Representatives Commission V for mines and energy, industry and trade, cooperatives, investment, environment and manpower on the recommendation of the task force.

The CPP block currently produces 77,800 barrels of oil per day (bpd), accounting for 9.7 percent of Caltex's production of 765,000 bpd. Caltex is the country's largest oil producer.

Jointly owned by giant U.S. oil companies Chevron Asiatic Ltd and Texaco Overseas Petroleum, Caltex has pushed for years to extend its contract on the block for a further 20 years, but then president Soeharto decided last year to transfer exploitation of the block to Pertamina after the contract ends.

Soeharto's successor B.J. Habibie opted to review the decision given Pertamina's financial woes in the monetary crisis.

The cross-ministerial task force was instructed to find the best among the four alternatives of having the new contract offered to Pertamina, reoffered to Caltex, operated through a joint venture of the two companies or put out to tender.

Kuntoro added the team had also recommended that Caltex and Pertamina take equal stakes in the CPP block joint venture.

The government was also advised by the task force to increase its share in the block's oil wells -- which are developed with primary technology and secondary enhanced oil recovery (EOR) technology -- from 85 percent at present. Kuntoro did not specify the amount of the recommended increase.

It was advised that the government's share from the wells which are to be developed with tertiary EOR technology should be lower than 85 percent due to the high investment needed for its installation, Kuntoro said.

Caltex's president earlier said the CPP block's production would significantly drop if it was not developed with tertiary EOR technology due to its mature condition.

Both Caltex and Pertamina are ready to install tertiary EOR technology in the block, which needs an investment of about $1.3 billion for 20 years.

Under the package of incentives announced by the government in August 1992, the government's share in the oil output from wells which are developed with tertiary EOR technology is 75 percent, compared with between 80 percent and 85 percent shares in conventional oil wells. The remaining shares go to contractors.

Pertamina takes and sells the government's oil shares on behalf of the government and submits the revenues to the Ministry of Finance. The company receives a fee for the service. (jsk)