Govt to decide on future of Riau oilfield; protect Caltex operation

Mines and Energy Minister Purnomo Yusgiantoro said yesterday that he will soon ask President Abdurrahman Wahid and Vice-President Megawati Soekarnoputri to decide on the future of the Coastal Plain Pekanbaru oil block, as talks between the Riau government and state-owned oil and gas company Pertamina on the matter have hit a snag.

"The matter is beyond my authority," he told Dow Jones Newswires on the sidelines of an energy conference. "This matter has become a political matter."

Pertamina and the government of Riau, which hosts the oil block, failed to reach an agreement over the equity split of a joint venture to operate the block beginning in August of next year. The block is now run by PT Caltex Pacific Indonesia, a joint venture between Chevron Corp. and Texaco Inc., which recently announced their merger.

President Wahid in late April opened an option for the Riau government to participate in the operation of the block next year to appease the restive, resource-rich province.

The talks between Pertamina and the Riau government failed to bring about a result as the Riau government demanded a 70% stake in the joint venture, which Pertamina rejected.

Caltex Pacific stopped new investment in the block 18 months ago due to uncertainties over the future of the contract, Caltex Pacific President Director Humayunbosha said before a parliamentary committee hearing November 13.

As a result, production from Coastal Plain Pekanbaru has fallen to 60,000 barrels a day from 78,000 b/d.

Security concerns

Purnomo also said that he will ask the police to disperse any strike which could obstruct Caltex Pacific's crude oil production activities.

"I have told Caltex Pacific to call me directly any time its production activities are disrupted," he said.

"I will then ask the security authority to take stern action."

Being the country's largest crude oil producer, the government won't allow any disruption to Caltex Pacific's production activities, he added.

Caltex Pacific has stopped work on 17 drilling rigs due to a 'wildcat' strike, which began earlier this week.

More than 3,000 employees of contractors working for Caltex Pacific have participated in the strike, which started Tuesday. Caltex Pacific directly employs 5,800 people, while another 26,000 are employed by the company's contractors.

While the strike has not affected crude production, delays in drilling the new wells may delay or reduce new production volume planned for first quarter 2001, an official with the company said Thursday.

The workers, organized by the Indonesian Prosperous Labor Union, or SBSI, are seeking higher wages ahead of January's anticipated increase in Indonesia's minimum wage structure.

Under the proposed minimum wage increase, workers in Riau province, the site of most of Caltex Pacific's operations, would see their wages rise by 31%.

Striking workers are seeking a 360% rise in overall pay and other benefits, a Caltex Pacific official has said.

Caltex Pacific said it would neither pay striking workers nor conduct negotiations as long as strikes continue.

Purnomo added that the local office of the Manpower Department will negotiate with SBSI representatives on the matter next week.

Strikes, blockades and sabotage at Caltex Pacific's Riau operations have significantly slowed Caltex Pacific Indonesia's production this year. (*)