Caltex says strikes impede new well drilling

PT Caltex Pacific Indonesia has stopped work on 17 drilling rigs, due to a "wildcat" strike, a Caltex Pacific official told Dow Jones Newswires Thursday.

More than 3,000 employees of contractors working for Caltex Pacific have participated in the strike, which began Tuesday. Caltex Pacific directly employs 5,800 people, while another 26,000 are employed by the company's contractors.

While the strike has not affected crude production, delays in drilling the new wells may delay or reduce new production volume planned for first quarter 2001, Caltex Pacific managing director Gary Fitzgerald said. He declined to give production targets for next year.

The workers, organized by Indonesian Prosperous Labor Union (SBSI), are seeking higher wages, ahead of January's anticipated increase in Indonesia's minimum wage structure, Fitzgerald said.

Under the proposed minimum wage increase, workers in Riau Province, the site of most of Caltex Pacific's operations, would see their wages rise by 31%. Striking workers are seeking a 360% rise in "overall pay and other benefits," Fitzgerald said.

In a press release, Caltex Pacific said it would neither pay striking workers nor conduct negotiations as long as strikes continue.

Strikes, blockades and sabotage at its Riau operations have significantly slowed Caltex Pacific Indonesia's production this year, Fitzgerald said.

October production fell to 698,000 barrels a day, while November production is expected to average "in the 695,000 bpd range," he added.

In the year to date, Caltex Pacific's crude production averaged 710,000 bpd, 4% below the company's original target of 740,000 bpd for 2000.

Indonesia's total crude production in October was 1.273 million bpd, down from 1.309 million bpd in September, according to the Organization of Petroleum Exporting Country's monthly report, released Tuesday. Indonesia's current output ceiling is 1.365 million bpd under OPEC's production allocation system.

Caltex Pacific's cost of production, excluding fuel, has averaged US$1.75 a barrel in the year to date, about 6 cents higher than the company's forecast. Production disruption has been the primary cause for higher costs, Fitzgerald said. He noted that Caltex Pacific's expenditures are in line with budgeted targets in terms of "absolute dollars spent," albeit for lowered output.

Nonetheless, Caltex Pacific remains "interested in new opportunities in Indonesia," and plans to invest US$1.8 billion there in the next five years, Fitzgerald said. He declined to comment on specific investment projects.

Fitzgerald said no new progress has been made in an ongoing dispute over the Coastal Plain Pekanbaru production block, for which Caltex Pacific's operating contract will expire in August. Riau's provincial government, which demands a 70% stake in the operation of the block, is locked in a dispute over the size of that stake with Indonesia's state-owned oil and gas company, Pertamina.

Caltex Pacific stopped new investment in that block 18 months ago due to uncertainties over the future of the contract, Caltex Pacific President Director Humayunbosha said before a parliamentary committee hearing Nov. 13.

As a result, production from Coastal Plain Pekanbaru has fallen to 60,000 bpd from 78,000 bpd. Operating costs for that block have risen to $1.80/bbl, from $1.63/bbl in 1999, Fitzgerald said.

Caltex Pacific Indonesia is a joint venture between Chevron Corp. (CHV) and Texaco Inc. (TX), which recently announced their merger. (*)