Government halts Caltex-Conoco barter deal

The government has decided to stop the oil-for-gas barter deal between Caltex Pacific Indonesia (CPI) and ConocoPhilips following a press report that the deal had caused financial loss to the state.

Director general of oil and gas at the Ministry of Energy and Mineral Resources Iin Takhyan said that BP Migas, which is in charge of oil and gas exploration and production, had asked Caltex to pay the gas it received from Conoco in cash.

"The spending for the gas purchase can be categorized as 'cost recovery' so that it could be compensated from the proceeds of the oil sales," he said as reported by Kompas daily on Friday.

Caltex has obtained gas from Conoco for several years to be burned to support the former's production enhancement program in its old oil fields in Riau. The company exchanges the gas with its crude oil. Prior to the oil-for-gas barter deal, Caltex burned about 60,000 barrels of crude oil to support its production enhancement program. Conoco sends the gas from fields in South Sumatra, which it has bought from Gulf Resources.

A member of the House of Representatives (DPR) unveiled last week that the barter deal had caused a great financial loss to the state because Conoco used the gas production sharing formula in dividing the proceeds from the sales of the oil it received from Caltex with the government.

Under the standard production sharing contracts, the government takes 70 percent of contractors' gas output with contractors keeping the remining 30 percent. With regards oil output, the government takes 85 percent, while contractors get 15 percent. (*)