Riau forms an oil company to take over CPP oil block

Riau will soon form an oil company as a preparation to take over the management and operation of the Coastal Plain Pekanbaru (CPP) oil block from the current operator PT Caltex Pacific Indonesia (CPP), Kompas daily reported on Monday.

The new company, which will be renamed Riau Petroleum, will be jointly owned by the provincial administration, and the Siak regency, where the oil block is located, the province?s senior official said at a seminar held by the association of the Riau students in Jakarta over the weekend.

The official said that the company, which will act as Pertamina?s sharing contractor, will cooperate with either local or foreign oil companies in operating the CPP oil block.

The company will later form a joint venture with Pertamina to carry out the daily operation of the CPP oil block. The joint venture, according to the existing oil law, will receive 15 percent of the oil production, and the remaining 85 percent will go to the government through Pertamina.

The local government hopes that 70 percent of the 15 percent of the oil production allocated to the joint venture would go to the local government?s coffer and the other 30 percent to Pertamina.

The Ministry of Energy and Mineral Resources has decided to transfer the management and the operation of the CPP oil block to a joint venture between Pertamina and locally-owned company after the current contract currently held by Caltex ends in August this year.

Pertamina will be given 90 percent stake in the planned joint venture, while the local company the other 10 percent. The Riau administration, however, rejects the offer arguing that the 10 percent ownership for the local firm will be too small.

The ministry has offered a number of incentives as the compensation of the Riau minority status in the joint venture. But the provincial administration is still unsatisfied with the offer. (*)