Riau governor and DPRD divided over CPP oil block

Riau governor Saleh Djasit and members of the province's legislative council (DPRD) have been divided over the future role of the province in the Coastal Plain Pekanbaru (CPP), one of the largest producing oil blocks in the province.

Governor rejected the central government's decision to give a 10 percent interest in the oil block while most of the councilors said the percentage of the province's ownership does not really matter as long as the provincial authority is appointed as the operator.

"The most important thing for Riau is to become operator of the oil block. If the governor rejects it and continue with his ambition to control the ownership in the oil block, we could sue him," Deputy chairman of the legislative council Soeradno told DetikCom in an interview.

He said that the governor and his technical team had spent at least Rp 700 million (US$=Rp9,600) for their traveling costs to Jakarta in their efforts to lobby the central government to give the province a majority stake in the oil field. "But the result is nothing," Unlike the governor's team, the legislative council and Forbid non-governmental organization had succeeded in convincing the central government on the need to give controlling power in the management of a company, which will operate the oil block.

The government has decided not to extend Caltex Pacific Indonesia's contract to operate the oil block, which will end in August this year. It has agreed to involve the province in the management of a company, which will operate the oil block, but the governor wants to have at least 70 percent stake in the company.

The governor's demand was rejected. The government allowed the province to have only 10 percent stake. As the compensation of the minority ownership, the central government among others allows the appointment of locals in the company's board of executives.

According to the existing regulation, oil concessions in the country are developed under a production sharing contract in which an operator receives 15 percent of the production and the government the other 85 percent.

Under such a scenario, the Riau provincial administration will receive 10 percent of the 15 percent of the oil production which would be received by the planned joint venture as the operator of the oil block, while the other 90 percent to go to Pertamina.

In addition, the local government will also receive 15 percent of the government's share as stipulated in the inter-governmental fiscal balance law.(*)