ChevronTexaco to shed over 30% of staff in Indonesia by year-end: Report

ChevronTexaco, the single largest crude producer in Indonesia, is looking to evolve into a leaner organization in the country by letting go of almost a third of its staff by the end of this year, sources close to the company said was quoted by Platts as saying.

Most of the personnel to get the golden handshake would be from the administration in Jakarta and Riau, where the field operations are based. ChevronTexaco in Indonesia is striving for efficiency in the midst of rising production costs as its oil output from the giant Minas and Duri fields in Central Sumatra has been in a sharp downward spiral for the past four years. "Crude production is declining...it is barely 510-520,000 b/d now...and there are

[proportionately] too many employees," said a source. A special team constituted within the company is currently weighing and studying the lay-off package to be offered. The company has a current staff strength of about 5,800, of which almost 2,000 would go.

The woes of ChevronTexaco, whose fields are operated by Caltex under production sharing contracts with state Pertamina, began in the months following the 1997-98 Asian financial crisis and the downfall of the Suharto regime in mid-1998. Local protests and demonstrations erupted in Caltex's producing areas in Riau, spurred by the new spirit of reform. These deteriorated into routine acts of vandalism, destruction and theft of field equipment, and blockades of roads and vital facilities, sending crude production plummeting. Minas and Duri output, from a peak of 760-770,000 b/d in 1998, had slipped to around 730,000 b/d by end-1999, 700,000 b/d by end-2000, 620,000 b/d by end-2001, and 500,000 b/d by the end of last year, Platts records show. In August 2002, ChevronTexaco took another

hit when it handed over its Coastal Plain Pekanbaru block to a joint venture of Pertamina and a local Riau company after losing a fierce, long- drawn battle to secure an extension for its expiring PSC. CPP at the time was averaging about 40,000 b/d of Minas production.

Adding to the operational and efficiency concerns is the climate of uncertainty in Indonesia, sources familiar with the company's strategy said. The country's first direct presidential election slated for next year is heating up the political arena, Indonesia watchers said. Another US upstream giant, ExxonMobil, recently decided not to renew major third-party contracts for manpower and field

services in its gas operations in the troubled Aceh province, resulting in 1,200 workers losing their jobs, some of them after 15-30 years of service. ExxonMobil cited reduced requirements on account of declining gas production. The company has also weathered an atmosphere of violence from the activities of the Aceh separatist rebels. Protests and strike threats from disgruntled locals

have also plagued the large natural gas operations off East Kalimantan. Meanwhile, Indonesia's new oil and gas law No 22 implemented in November 2001 is introducing some major changes in an effort to deregulate and liberalize the country's petroleum sector.

ChevronTexaco is for the time being not interested in entering the downstream sector in Indonesia, where state-owned Pertamina is giving up its decades-old monopoly to make way for new players in retail and distribution, sources said. The stance is shared by other foreign companies which for decades have been major upstream players in Indonesia. ChevronTexaco might want to shift its focus from oil to natural gas in Indonesia, sources said, but details of the plans are not yet known.

There is no gas in its acreage in Sumatra, so it might look to blocks offshore East Java, they said. Meanwhile, foreign upstream players established in Indonesia are demanding greater incentives and more "guarantees" from the government, including securing extensions for their PSCs several years ahead of the expiration before they commit scarce funds to E+P and field development projects, sources noted. (*)