Pertamina and Riau Reach Agreement Over CPP Oil Field

Pertamina is willing to advance funds to the Riau administration to cover its half of the exploration costs associated with the Coastal Plains Pekanbaru (CPP) oil field after August 2002.

Based on the agreement, Riau has to provide 50 percent of the total US$50 million needed to explore the oil field. Pertamina understands the difficulties Riau faces in coming up with such a large amount in three to four months. The company will work closely with the office of the state minister for state enterprises and PT Bumi Kiat Pusako, a provincial government-run company that is currently exploring the oil block.

The two sides have agreed to establish a consortium for the exploration of the oil field and have the option of selling their shares. The Riau governor stated that his administration was ready to provide 50% of the total US$50 million or some Rp 250 billion. The money could be taken from the provincial budget or other sources. Siak regent, Arwin A.S., said the regency would provide 30 percent of Riau's share of the "participation fund" because 93 percent of the oil field was located in the regency. Arwin said he would hold negotiations with Pertamina on the issue.

The CPP site is operated by Pertamina and PT Caltex Pacific Indonesia, whose production-sharing contract will end on August 8, 2002.