Pertamina agrees to have only 55% stake in CPP oil block

State owned oil and gas company Pertamina has agreed to have only 55 percent stake in a joint venture which will take over the management and operation of the Coastal Plains Pekanbaru (CPP) oil block in Riau, Bisnis Indonesia reported on Monday.

Gatot Kariyoso Wiroyudo, the state oil and gas company's director for exploration and production, said in Jakarta on Monday that Pertamina, which previously demanded for at least 60 percent, was ready to have only 55 percent as long as its partner Caltex Pacific Indonesia (CPI) agreed to carry out a long-term transfer of technology program.

"We hope Caltex will agree with our proposal," he told the press. "If negotiations runs smoothly, we hope the share ownership agreement could soon be made."

The contract of the CPP oil block, which is currently held by PT Caltex, will expire in August next year. The oil block produces crude oil of about 70,000 barrel per day.

The government has asked Pertamina and Caltex to form a joint venture to operate the oil block but negotiations over the ownership of the oil block have been stalled, as both parties demand a majority stake.

Pertamina, which holds the rights of the country's oil and gas resources, will still control 85 percent of the oil block's crude oil production despite the joint venture agreement, and the other 15 percent would go to the proposed joint venture, Gatot said.

"Pertamina will share 85 percent of the total crude oil production, plus 60 percent of the crude production which go to the joint venture," he added.

The House has asked the government to involve Riau province in the joint venture in a bid to accommodate the local people's demand for more control in the province's wealth.

Commenting on the local people's demand, Minister of Mines and Energy Susilo Bambang Yudhoyono said in Jakarta on Monday that the opportunity for Riau province to have ownership in the oil block was still open.

But he warned that the local authority's demand to wholly control the ownership in the CPP oil block was irrational.

Economic observers in Riau said on Saturday that both Pertamina and Caltex should listen to the local people's demand to get share in the oil block, which has so far only benefited the central government, Riau Pos reported on Monday.

If Riau province could not have any stake in the oil block, it should be allowed to raise contribution fee from the oil block, J. Azheri, the vice chief editor of the Riau-based Otonomi magazine. The Riau people should be given the chance to benefit from their own natural resources, he added.

Other economist Edyanus Herman said that Caltex, which had benefited much of the province's oil resource, should help the Riau province in its effort to own part of the oil block. "Caltex should proactive to help the Riau lobby the government," he added. (*)