Government must be careful in selecting CPP operator: Caltex

The government should be careful in selecting the future operator of the Coastal Plains Pekanbaru (CPP) oil block in Riau to maintain high production rate at the block, PT Caltex Pacific Indonesia, the current operator of the block, said.

Caltex's managing director R.M. Gailbraith warned Thursday production at the block would be significantly declining if it was operated by inexperienced operators given the fact oil fields at the block were already mature.

Only qualified and financially strong operators would be able to maintain high production rate at the block, he said.

"The government must select the operator most capable of reducing CPP's decline rate or increasing production and that company must possess the newest technology, have the most qualified people and have a long demonstrated track record of operating excellence," Gailbraith told Petromindo.Com

He also noted the future operator must be able to raise about US$1 billion for the new investment and continuing operation of CPP during the next 15 to 20 years.

"Caltex has those qualifications and as we have openly stated throughout this process, we remain open to discussing any commercial and economically attractive option involving our continued participation in the CPP," Gailbraith added.

Gailbraith made the statement following a report by Bisnis Indonesia, quoted by Petromindo, which he said erroneously stated CPP's production rate had declined 30 percent to an average 50,000 barrels per day (bpd) this year, from 70,000 barrels last year.

According to him, CPP's output had declined 19 percent to 50,000 bpd this year from 62,000 bpd last year.

Gailbraith said production at CPP had been declining since 1990 but CPI had managed to lift the output after investing the expensive waterflood technology into the Zamrud field of the block.

In 1990, production topped 88,000 bpd but it steadily declined to 56,000 bpd in 1994. CPP's output started to climb to 76,000 bpd in 1995 and to the peak of 79,000 bpd in 1996 following the use of the waterflood technology. The block's output then slowly declined to 78,000 bpd in 1997, 71,000 bpd in 1998, 70,000 bpd in 1999 and 62,000 bpd last year.

The government has appointed a joint venture to be established by state oil and gas company Pertamina and the Riau provincial administration to operate the block after Caltex's production sharing contract (PSC) on the block expires in August this year.

But, thus far both Pertamina and Riau remain at odds over share composition.

Gailbraith noted that CPI remained interested to participate in the operation of the block.

"As a business entity, not a political entity, Caltex has remained non-political and has not been involved in the political discussions and decisions between the Riau and Central Governments.

"As such, we have not received any indication of, or offer on, Caltex's future role in CPP," he said.

As the future management of the CPP block remained unclear, Caltex has asked for a 18-month to two year extension of its contract on the block to ensure that the block could still be managed effectively during the transition period.

Director general of oil and gas at the ministry of energy and mineral resources Rachmat Sudibyo has indicated that the government might approve the request.

Caltex is equally owned by American energy firms Chevron and Texaco. (Alex)