Riau seeks control of CPP oil block

JAKARTA (JP): Riau Vice Governor Rustam S. Abbrus said the province was determined to gain full ownership and operation of the Coastal Plains Pekanbaru (CPP) oil block in Sumatra after PT Caltex Pacific Indonesia's contract on the block expired next year.

Rustam said over the weekend the province of Riau was capable of operating the CPP oil block, and urged the central government to heed its aspirations.

"Why do people think we're not capable," Rustam told reporters during a break in a seminar on the economy held by the Indonesian Democratic Party of Struggle (PDI Perjuangan).

Following a recommendation by the House of Representatives, the government decided two years ago to transfer the ownership of the block to a joint venture between Caltex and state oil and gas company Pertamina after Caltex's contract expires in 2001.

Riau's demand for full ownership of the block comes amid negotiations between Caltex and Pertamina over how they will divide revenue from the block.

Minister of Mines and Energy Bambang Susilo Yudhoyono said last month the government was mulling the possibility of Riau becoming a partner in the joint venture.

Bambang said the government would evaluate Riau's financial, managerial and technical capabilities.

Analysts say the province's demand for full control of the oil block would violate the House's decision to give Pertamina a significantly higher stake in the oil block than Caltex.

Rustam, however, said the House's decision was in conflict with the Riau council's demand that the province be given complete ownership of the oil block.

He also blasted Caltex president Humayunbosha for not supporting the province's efforts to secure control of the block.

Humayunbosha said during an earlier hearing with House of Representatives Commission VIII for mines and energy it would be better for the provincial administration to demand more tax earnings from CPP, rather than to own a stake and invest in the block.

He said the oil business was risky and there was the possibility the province would not get a return on its investment.

Rustam said Riau was prepared to bear the financial risks, but would not elaborate on where the province would get the funds to operate the block.

"Don't think we are too incompetent to handle the oil block," he said.

Former Pertamina president Martiono Hadianto, however, dismissed Rustam's statements. "Let's not talk about Riau. Even the Republic of Indonesia is not capable of fully operating the oil block."

According to him, after 30 years in the oil business, Pertamina still lacked the skilled labor, money and technology to compete against multinational oil companies like Caltex.

He said Riau should prepare itself and enter the oil business step-by-step, rather than demanding full ownership of the block.

The CPP oil block currently produces about 70,000 barrels per day, while Caltex, the country's largest oil producer, has a total production capacity of 750,000 barrels per day.

Caltex, a joint venture between U.S. oil companies Chevron Corp. and Texaco Inc., currently operates four oil blocks in Riau: CPP, Rokan, Mount Front Kuantan and Siak. (bkm)