East Java administration wants a stake in West Madura block

The East Java provincial administration has threatened to cancel the contract on the West Madura Offshore (WMO) oil and gas block if it did not receive a 25 percent stake in the block, The Jakarta Post reported on Saturday.

Deputy Governor Saifullah Yusuf said the new WMO contract did not adhere to the spirit of the regional autonomy law as the province was not allowed to be involved.

?We will take legal measures to ensure the provincial administration obtains a minimum 25 percent stake," Saifullah said after a plenary session at the provincial legislative council in Surabaya on Thursday.

Saifullah said a stake in the operation would improve the economy of Madura.

The WMO oil and gas block, located in the Madura Strait, spans 1,615 square kilometers and since 1981 has been managed by South Korean firm Kodeco Energy whose contract ends May 8.

Apart from Kodeco, which has a 25 percent stake, China National Oil Offshore Corporation (CNOOC) also has a 25 percent stake in WMO, with the rest owned by state oil and gas firm PT Pertamina.

WMO currently produces 13,400 barrels of crude oil and 139 million cubic feet of natural gas a day. The gas is channeled to the power plants of state electricity firm PT PLN, petrochemical firm Petrokimia Gresik and a number of other industrial users in East Java

On April 12, the director of Indonesian Resources Studies Marwan Batubara filed a report to the Corruption Eradication Commission (KPK) indicating corruption in the transfer of participating rights of WMO from Kodeco to PT Sinergindo Citra Harapan and from CNOOC Madura Ltd. to Pure Link Investment Ltd.

Before the KPK could conduct a field investigation, upstream oil and gas regulator BP Migas recommended Pertamina to operate the WMO block until 2014.

BP Migas senior spokesman Elan Biantoro said it was not likely the East Java provincial administration would obtain additional stakes in the oil and gas operation in the block because it had lost out to four oil and gas companies.

?The only way for the East Java government to manage the natural resources is out of the kindness of the Energy and Mineral Resources Ministry. The East Java leaders should meet him directly? Elan said.

Lapindo Brantas Inc., the company blamed for the Sidoarjo mud flow disaster, announced plans for a, drilling project in Sidoarjo in August.

Company spokesman Diaz Roychan said Lapindo would begin to explore for oil in the Tanggulangin block, 2.5 kilometers from the mud volcano most experts agree was triggered by the firm?s drilling operations.

?There is nothing to be worried about over environmental impacts because the wells we are going to drill are not related to the mud-flow area,? he told The Jakarta Post on Friday.

The 2006 mud flow disaster has displaced more than 40,000 residents. (*)