President supports Riau demand over CPP oil block
JAKARTA (JP): President Abdurrahman Wahid backed on Saturday the provincial administration of Riau's demand to take over the management of the Coastal Plains Pekanbaru (CPP) oil block, despite opposition from state oil company Pertamina.
Speaking during a meeting with Riau's social and political leaders during his visit to the country's largest oil-producing province, the President said locals had the right to manage their oil resources.
During his visit, which was marred by student protests, Abdurrahman also pledged to cancel the controversial plan to impose a 10 percent value-added tax (VAT) and a sales tax on luxury goods in the industrial bonded zone of Batam, which is located in the province.
Regarding the management of the CPP block, the President said he would ask Pertamina to delay its ongoing negotiations with Caltex Pacific Indonesia over the future of the oil block to allow Riau to prepare to take over the block.
Delaying the negotiations would give Riau the time to set up its own company to operate the oil block, the President was quoted by Antara news agency as saying.
Riau has insisted on taking over full control of the oil block after Caltex's contract expires in August 2001.
The government decided in 1998 to transfer the management and operation of the oil block to a joint venture of Pertamina and Caltex. But negotiations over the establishment of the joint venture have been stalled as both parties insist on controlling the majority stake in the company.
Legislators have asked that Riau be involved in the joint venture, but the appeal has thus far received little response from the companies.
Under existing laws, Pertamina holds the concession rights to operate the country's gas and oil resources. Local and foreign companies operating in the oil and gas sector must obtain production-sharing contracts from the state oil and gas company.
President Abdurrahman said he would soon order Minister of Finance Bambang Sudibyo to follow up on his decision.
"If the finance minister's signature is not enough then I will use mine," the President said, receiving a thunderous applause from the local leaders.
The CPP oil block, which produces approximately 70,000 barrels of crude oil per day, is managed and operated by Caltex. The company is a joint venture of American-based oil companies Chevron Corp. and Texaco Inc., and currently operates four oil blocks in Riau: CPP, Rokan, Mount Front Kuantan and Siak. The company produces 740,000 barrels of oil per day, or about 80 percent of the country's total crude oil output.
The President's visit to Riau was tarnished by student protests demanding the central government allow the provincial administration to manage its oil resources.
Police fired tear gas and warning shots to disperse hundreds of students, who attempted to meet with the President at the Governor's Office.
A student from the University of Riau said the protesters wanted to discuss the ownership of the CPP oil block with the President.
The police, however, prevented the students, who had been waiting for the President since Saturday morning, from reaching the office.
According to an eyewitness, the tear gas and warning shots succeeded in dispersing the students, but police officers ran after them and beat them.
During his visit, the President also made the surprise announcement that the government would cancel its plan to impose a 10 percent value-added tax and a sales tax on luxury goods on Batam island.
The government initially planned to impose a 10 percent VAT and a 10 percent to 35 percent sales tax on luxury goods on Batam, the country's largest industrial bonded zone, starting in April.
The plan has been met by widespread protests from both the island's residents and businesses. Over 60 foreign companies have threatened to leave Batam, long regarded as a tax-free haven, if the government implements the new tax policy.
Minister of Trade and Industry Yusuf Kalla delayed the imposition of the taxes until June to ease the protests, but his move seemed to be ineffective. (bkm/sur)