Caltex production will drop 10% after Riau takes over CPP field

Caltex Pacific Indonesia (CPI), the country's largest oil producer, will lose about 10 percent of its current production when the Riau provincial administration takes over the Coastal Plains Pekanbaru (CPP) oil field next year.

The company's vice president for corporate public affair, AR Chaidir, said in Jakarta on Tuesday that the oil giant, which operates four major oil fields in the province, produces about 700,000 barrels of crude oil per day, while the daily production of the CPP oil field is about 60,000 barrel per day.

He said that the production in the CPP field, which previously reached between 70,000 barrel and 80,000 barrel per day, had continued to decline lately due to uncertainty about the future operation of the oil field. Chaidir did not explicitly disclose the reasons about the decline in the oil field's production but sources said that the decline was due to the cut in the investment in the production facilities.

"The oil production is capital intensive industry. Whoever operates the CPP oil field next year, they have to inject fresh investment in a bid to maintain the production level," he told Astaga.com. He estimated that the CPP production will immediately fall to between 50,000 and 55,000 barrels per day as the consequence of the cut in the new investment.

In early 1998, The government allowed Pertamina and Caltex to form a joint venture to take over the oil field after the current contract ends in August next year. However the plan was dropped immediately after President Abdurrahman Wahid surprisingly decided to hand over the management and the operation of the oil field to the local government.

The ministry of mines and energy then proposed the Riau administration to cooperate either with Pertamina or Caltex in operating the oil block given the province's lack of capital and technology to do the job alone. But the offer was rejected and the local government said it would seek its own partner.

The government earlier promised to give its financial decision about the possibility of Riau operating the oil field next month, or one year before the contract ends. But Director General of Oil and Gas Rachmat Sudibyo said last week it was still uncertain whether Riau would be able to get the final approval next month, because the local government's proposal in taking over the oil block had yet to contain technical aspects of the oil operation such as the amount of funds the province would invest to maintain the production level and its partners in operating the oil field.(*)