House backs Riau's plan to take over CPP oil block

The local government of Riau province has again received a full support from the House of Representatives (DPR) in its efforts to take over the management of the Coastal Plain Pekanbaru (CPP) oil block.

The Commission VIII, which is in charge of mining and investment, said in a hearing with the province's governor Saleh Djasit and his assistants on Wednesday that the province deserved to gain the authority in managing and developing its owned oil resources.

But the House members cautioned the local administration to be careful in selecting partners in operating the oil block to ensure that the operation of the oil block would bring more benefits to the local people.

"Please be careful in selecting the partner because if you pick the wrong one, it will not only bring losses to the local people but also to the government," the vice chairman of the commission Antonius Rahai said at the conclusion of the hearing.

During the hearing, the governor said that the local administration would soon establish a company to take over the management and the operation of the oil block from PT Caltex Pacific Indonesia (CPI) after the current contract ended in August next year.

The company that would operate under the name of PT Petroleum Riau Makmur would have an initial capital of about Rp 1 billion and would be solely owned by the local government, he said. He added that the company would need about US$50 million in new investment to carry out its operation.

The governor said that his office did not really bother with the investment needs because many oil companies had expressed their intentions to forge partnership in managing and operating the oil block

The Riau administration earlier said it would establish a consortium comprising of local companies to operate the oil block. The consortium will work with a professional oil company that will be selected through an open bidding in operating the oil bloc, which has 297 productive oil wells.

The Ministry of Mines and Energy has proposed the Riau province to operate the oil block in cooperation with either Pertamina or Caltex or with both of them. But the proposal was rejected.

Caltex, which operates the oil block until the contract is expired in August next year, has reduced operational costs due to uncertainty in the future of the oil field, causing the fall in its daily production to some 50,000 barrels from about 80,000 barrels early this year. (*)