Caltex may avoid Indonesia blockade

Caltex's subsidiary says security problems will mean revenue losses

US oil company Caltex may have averted a blockade of its operations in the northern Indonesian province of Riau after it offered a package of concessions, including better job prospects for local people.

The blockade was due to begin on Wednesday 8 August but - after seven hours of talks on Tuesday - local leaders have agreed to put the company's proposals to the protestors.

Whether or not they accept, unrest in Riau province has already caused revenue losses of $400m in 2001 for PT Caltex Pacific Indonesia (CPI), said the subsidiary's president Humayun Bosha on Wednesday.

During the negotiations, CPI agreed to allocate three senior posts to local people and to train graduates for management jobs, according to the Kompass newspaper.

Disagreements still exist

It did not accept it demand for compensation payments of $26m a year to fund community development, but will consider increasing what it currently pays, the newspaper said.

MM Chaidir, the speaker of the Riau provincial assembly who led the negotiating team, said he was satisfied with CPI's offer.

But he said: "We still have to officially present the case to the Riau people through the provincial legislature. They will decide whether the people of Riau will accept the deal."

He did not say when this would happen.

Government backs Caltex

We still have to officially present the case to the Riau people through the provincial legislature. They will decide whether the people of Riau will accept the deal

MM Chaidir, Riau negotiator

It remains unclear whether more militant members of the movement to revoke CPI's licence will think the concessions go far enough.

One of them, Tabrani Rab, told Agence France Presse "personally I am not fully satisfied with this outcome" but added "this is the best we can get".

They held a rally a last weekend which issued President Megawati Sukarnoputri with the 8 August deadline to revoke CPI's 12-month licence extension.

After that rally, Mr Rab said the protestors were prepared to "make an Exxon" out of CPI.

ExxonMobil was forced to close its gas fields in northern Sumatra for five months this year because of threats to its staff and clashes between separatists and the army.

The Indonesian government has said it will stand by its decision to extend the licence to CPI for 12 months from 8 August.

Emergency talks

The negotiations in Riau followed emergency talks between the energy minister, CPI, its Indonesian partner Pertamina and the police.

The dispute centres on the Coastal Plain Penkanbaru (CPP) oil block where CPI operates four wells.

CPI president Mr Humayun said "rampant security disruptions" in Riau have cost the company $1m a month in damage to equipment in 2001 "and the incidents are escalating".

CPI has also been forced to cut back on production.

The four wells currently produce 50,000 barrels of oil per day, but are capable of yielding 70,000.

Local people have long demanded a 70% stake in the CPP block once the CPI contract expires, the Jakarta Post reported.

The Riau Islands are located between Singapore and the island of Sumatra.