Pertamina-Caltex joint operation gets govt support

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)