Riau takes control of CPP oil block

Riau takes control of CPP oil block

Adianto P. Simamora, The Jakarta Post, Jakarta

The government officially transferred on Tuesday the operation of
the Coastal Plains Pekanbaru (CPP) oil block from American oil
and gas company PT Caltex Pacific Indonesia to a joint venture of
state-owned oil and gas Pertamina and Riau province-owned firm PT
Bumi Siak Pusako (BSP).

The move is expected to end years of dispute over rights to
develop the CPP oil block.

The joint-venture company will start operating the CPP block
on Aug. 9.

Caltex's contract for the CPP block will expire on Aug. 8.

Under the new contract, Riau would become the first province
in the country to enter the upstream oil business, which has long
been dominated by foreign companies, Pertamina and some
privately-owned domestic companies.

The contract was signed by chairman of the newly set-up
implementing body Rachmat Sudibyo, Pertamina president Baihaki
Hakim, and president of BSP Azaly Djohan.

The signing ceremony was witnessed by Minister of Energy and
Mineral Resources Purnomo Yusgiantoro.

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 regency, with total of 486 wells.

Azaly said that BSP was also still negotiating for the share
composition of the regencies in the joint venture.

He said that BSP would invest some US$300 million in the joint
venture.

He said that in the short term, the joint venture company
would maintain the current production level of 42,000 barrels of
oil per day.

"But in the long term, we shall boost production by
establishing some five new wells. We may invest some $500,000 to
$1 million per well," Azaly said.

He added that the joint venture would recruit around 285
workers, of which 29 would come from Caltex.

Caltex's contract to operate the CPP block expired in August
last year, but the company requested the government extend it for
another year as Riau and Pertamina had yet to reach an agreement
over share composition in the BSP.

This angered local residents.