Pertamina and Caltex negotiations suspended

Current negotiations between state oil and gas company Pertamina and PT Caltex Pacific Indonesia over future operations in the Coastal Plain Pekanbaru (CPP) oil producing block, have been suspended following President Abdurrahman Wahid's decision to allow the Riau provincial administration to take over the block.

Minister of Mines and Energy Susilo Bambang Yudhoyono said on Wednesday that the negotiations would no longer be needed, The Jakarta Post reported.

The two companies have been engaged in talks since early last year to prepare the joint venture. But negotiations did not run as expected as both parties demanded the majority stake in the planned joint venture.

President Abdurrahman Wahid unexpectedly yielded to demands from Riau officials to control the block. During his visit to the province last week, the President suggested Riau form a company to operate the block.

The minister said the final stakes of both companies in the CPP block would have to await clarification of Riau's participation in the operation.

It is unclear whether the President will grant Riau the entire block, but state secretary Bondan Gunawan earlier indicated that the province should join Pertamina and Caltex in a joint venture to operate the block.

Under the current oil and gas law, the joint venture would receive 15 percent of the oil revenue. The remaining 85 percent must be transferred to the government through Pertamina.

At present the CPP block produces about 70,000 barrels of crude oil per day (bpd) about 10 percent of Caltex's total crude production in the province. (*)