Gov?t says oilfield contract extension to give time for negotiation

Government said Monday the decision to give Caltex Pacific Indonesia one-year extension to manage Coastal plains Pekanbaru (CPP) whose contract would expire this week was to allow parties involved negotiate while keeping oil production undisturbed.

Secretary general of department of energy and mineral resources Djoko Darmono told reporters that the one-year extension would give enough time for Pertamina, Riau government, Central government and Caltex to negotiate their participation the oilfield.

?If we just end the contract (with Caltex) on August 8, there will be no operator at the block. That means oil production from the field would stop, as no other parties except the present operator have the capability to run the oilfield,? said Djoko.

He added that due to the crude?s nature at CPP, once the production stopped, it would be very difficult to restart production.

"There is no intention from our part to exclude Riau people from having interst in CPP oilfiled," he said.

Separately, Pertamina?s president Baihaki Hakim shared Djoko?s opinion and added that Indonesia could not risk losing the income generated from the oil block if the contract was not extended.

On Friday, Bambang Kesowo, a top aide to President Megawati Sukarnoputri, said central government had extended the CPP oilfield contract by 12 months to Caltex.

The following day, Riau People congress held in Pekanbaru rejected the central government?s decision and demanded that one third of the income from CPP be given to Riau and that a number of local people be appointed to sit at the CPP management.

They threatened to blockade the oilfield if their demands were not met.

Pertamina and central government has been involved in a protracted dispute with Riau's local administration over interest in the CPP field after Caltex's contract expired.

Central government had offered Riau government 15 percent interest at the oilfield, but the latter insisted on getting 70 percent and operatorship of the field.

Djoko said the government had asked police and the armed forces to step up security measures at the oilfield, and according to him, police headquarters had sent 5 senior officers to monitor security condition around the oilfield.

He also said that the central government had found it difficult to negotiate with Riau because ?there are many parties claiming to be the authorized by Riau people and their demands often contradict to one another?.

Meanwhile, Caltex?s president Humayunbosha said that Caltex welcomed the extension and would invest US$ 8 million, apart from regular maintenance expenditure to keep the oilfield producing above 50,000 barrels per day.

He also said in the long-term, CPP would need some US$ 1 billion more investment over the field?s lifetime to get the block to produce at its normal 70,000 bpd.

?We have to invest on new technology to get back to the level of 70,000 bpd, and that, doesn?t come cheap,? he said.

He predicted the investment would start to peak between 2004 and 2005.

Caltex is equally owned by US oil giants Chevron and Texaco.(alex/godang)