INTERVIEW - Pertamina says Caltex must take part in future operation of CPP block
Thursday, October 19 2000 - 07:30 AM WIB
State oil and gas company Pertamina said the joint venture between Pertamina and PT Caltex Pacific Indonesia was the best alternative for the further development of the Costal Plains Pekanbaru (CPP) block in the Riau province after Caltex's contract on the block expires next year.
Pertamina's exploration and production director Gatot K. Wiroyudo said on Wednesday that Caltex should be allowed to take part in the future operation of the CPP block given the fact that the block's production facilities, including oil pipelines, were integrated with the production facilities of other blocks in the province currently being operated by Caltex.
If Caltex, which is equally owned by American firms Chevron and Texaco, was not allowed to take part in the future operation of the CPP block, the new operator would have to pay Caltex some fee for the use of the latter's facilities or otherwise build its own facilities to continue production.
"This will add the production cost of the block by US$1 to $2 per barrel," Gatot told Petromindo.Com.
He said the Pertamina-Caltex joint venture was the best combination to operate the block in the future with Pertamina representing the government and Caltex being the old operator, which knows well about the block.
He proposed that Pertamina hold 55 percent of the block with Caltex taking the remaining 45 percent shares.
He said Pertamina did not expect a third party to participate in the joint venture because that will reduce the shares of both Pertamina and Caltex in the block and as such cut the economic value of the block to both companies.
"Caltex must not be interested in the block any longer, if it is offered less than 45 percent shares," Gatot said.
The block normally produces 70,000 barrels of oil per day, but only 15 percent of the output is kept by the contractor with the remaining 85 percent delivered to the government in the so-called "government take" under the production sharing contract. Pertamina and Caltex will share the 15 percent output, if they tie up to operate the block in the future.
Gatot made the statement in comments to the Riau provincial administration's efforts of taking over the block or participating in the operation of the block after Caltex's contract on the block expires next year.
The province has even set up a company for that purpose.
Director general of oil and gas at the ministry of energy and mineral resources Rachmat Sudibyo said on Wednesday the government expected to make a final decision on the operation of the block by the end of the year.
For the moment, the government was allowing Pertamina to hold discussions with the Riau province for a solution, Rachmat told Petromindo.
Gatot said the Riau province did not actually need to have a stake in the joint venture to gain revenue from the development of the block.
Under the Intergovernmental Fiscal Balance Law No. 25/1999, which will be implemented next year, the province will obtain a large share in the central government's revenue from the block.
The province or the province's business community could also benefit from the development of the block by providing service or supplies to the joint venture or taking part in the joint venture's infrastructure project, Gatot said.
"This measure might provide a larger benefit to the province than the one it might obtain by having a stake in the joint venture," Gatot said. (Lia KS)