Riau seeks control of CPP oil block

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)