Riau begins CPP operation despite unfinished business
Haidir Anwar Tanjung, The Jakarta Post, Pekanbaru, Riau
A joint venture between state-owned oil and gas company Pertamina and the Riau province-owned firm PT Bumi Siak Pusako (BSP) officially began the operation of the Coastal Plains Pekanbaru (CPP) oil block on Friday despite the existence of some unfinished business between local stakeholders.
Siak Regent Arwin AS told reporters after a ceremony marking the historic event in the Riau town of Siak at midnight on Thursday that no agreement had been reached between the regencies and the provincial government over their respective shares of the block.
He said that Siak regency insisted on demanding the lion's share of 70 percent of the stake belonging to Riau on the grounds that most of the block was located within Siak.
The law stipulates that the central government holds 85 percent of the shares and the rest goes to the regional government. State revenue from crude oil extraction after tax is divided up in a ratio of 85:15 and from natural gas extraction at 70:30.
The CPP block covers an area of around 9,600 square kilometers, of which some 92.8 percent is located in Siak regency, about six percent in Bengkalis regency and two percent in Kampar and Pelalawan regencies, with a total of 486 wells being involved.
Arwin expected the unsettled dispute would not affect the operation of the oil block, the first in the country ever to be controlled by a province.
"We mean business in the way we operate the oil block, so let's put the debates behind us. This is our internal problem which the central government is not supposed to intervene in," Arwin said.
The oil block was formerly operated by American oil and gas company PT Caltex Pacific Indonesia, whose contract expired on Thursday.
Riau Governor Saleh Djasit had wanted only 49 percent for Siak, with 15 percent of the remainder being shared by the province and 12 percent by each of the other three regencies.
The governor's written proposal to energy and mineral resources minister Yusgiantoro on July 22 that the signing of a production sharing contract between PT BSP and Pertamina's Oil & Gas Executive Body be postponed from the scheduled date of Aug. 8, 2001, was turned down by the government.
As the regencies were maintaining their claims, the control over the oil field remained unclear, amid rumors that the central government would again take over the block.
"We disagree with (central) government control. The share ownership within the BSP should therefore be based more on business considerations than local interests, which will only harm the stake belonging to the Riau community," Thamrin Nasution of the provincial legislature told The Jakarta Post.
Under the new management, the joint venture company expects to maintain the current production level of 42,000 barrels of oil per day. BSP president Azaly Djohan said in that in the long term the company would boost production by establishing some five new wells with an investment estimated to reach up to US$1 million per well.
BSP has announced a plan to recruit around 285 workers, of which 29 would come from Caltex.
Arwin expressed guarded optimism that the joint venture could manage the oil block, thanks to the new recruits.
"Everything is already in place, so there's nothing to worry about," Arwin said.
The CPP block has been a topical issue for years in view of the presence of two billion barrels of oil deposits on 30 plains in the block, making CPP's assets worth $500 million.
Caltex has been contributing Rp 3 billion a year to the provincial government from oil production here.
In sharp contrast, Caltex's contribution to the central government in November, for instance, totaled US$4.5 billion, which had prompted Riau to fight for control of part of the existing fields.