In August 1966, Indonesia signed the first production-sharing contract between a producing nation and a foreign operator, Houston independent Roy Huffington. That first contract became the prototype for the mechanism most commonly used today to facilitate exploration around the globe. Since then, international activity has often taken producers down a bumpy road with unexpected turns. Even in the middle of Sumatra, one U.S. producer, Santa Fe Snyder Corp., was forced to build speed bumps on the dirt roads it carved through the jungle-some of the locals were driving their trucks and motorbikes too fast. Thirty-four years later, Indonesia faces a few of its own bumps in the road. Its mature western provinces and higher-risk, less-drilled eastern ones face fierce competition to attract drilling dollars from the majors, although more independents are becoming interested. During last year's downturn, only four PSCs were awarded, versus 66 from 1996 to 1998. The government is widely and vocally seeking foreign investors to further develop its resources, particularly natural gas. Sometime by year-end 2000, state-owned oil company Pertamina will offer 34 exploration blocks, onshore and offshore, including 16 new blocks and 18 held over from a 1999 bid round. (See map below.) It already awarded three PSCs and four technical assistance contracts (TACs) in May, mostly to indigenous firms. Much work remains to be done. Operators have explored only 38 of the 60 tertiary sedimentary basins identified here, and they are producing from just 14 of them. Pertamina estimates the country's remaining reserves are 30- to 35 billion barrels of oil equivalent (BOE), including 9.6 billion barrels of oil and 136 trillion cubic feet (Tcf) of gas. This member of OPEC wants to encourage more activity in frontier areas in eastern Indonesia, where it recently began offering an improved 70-30 profit split as an incentive (versus the normal 85-15 split). There are PSC adjustments for deepwater exploration as well. And it also wants to develop a gas hub on Sumatra to feed Singapore and eventually, Malaysia. Longer term, new leaders at the national and company level intend to transform Pertamina into a more efficient global player able to participate fully at home and abroad. There is even talk of privatization, "although to be honest I think that's a long way off," says Gavin Law, Southeast Asia energy analyst for Wood Mackenzie in London. "Pertamina has to go through many changes first. It cannot continue to be a participant [in oil and gas activity] and a regulator with the breadth of control it has had, plus continue its social programs." Meanwhile, an oil bill was introduced recently that would take from Pertamina its long-held right to award PSCs, giving that function to the government (which has vowed not to change PSC terms themselves). According to Hart's Asian Petroleum News, Pertamina officials now say they will back this bill, although a year ago they opposed the idea of turning over PSC control to the mines and energy ministry. Whatever the outcome, petroleum income is vital to the economy of this Muslim country. The rapidly growing population, about 216 million, makes Indonesia the fourth largest in the world. Here, traditional ways of life found on outlying islands such as Bali and in the jungles of Sumatra, mix with Islamic, Christian, Hindu and capitalist beliefs. And, there are vestiges of the Dutch colonists who settled here in the 1600s when the area was the Dutch East Indies. A visitor might land at Jakarta's airport to find a Saudi Arabian 747 on the tarmac, waiting to shuttle the devout to Mecca during the annual Haj. One can drive past an athletic field and see teen-age girls playing softball-wearing traditionally modest Islamic headdresses. As one drives along broad boulevards lined with modern office towers in Jakarta's business district, neon signs advertise Compaq, Dunkin Donuts and Kentucky Fried Chicken. Yet many of the city's 11 million people choose to grab local snacks from the hundreds of small wooden pushcarts seemingly parked on every corner. Beneath the hustle and bustle, the country's new president, Abdurrahman Wahid, elected last October, is struggling to forge a new Indonesia after three decades of iron rule under Suharto marked by military might, cronyism and corruption. He is trying to accomplish this against the lingering effects of the 1997 Asian financial crisis that threw the economy and the rupiah into a tailspin from which Indonesia is just now emerging. Unemployment remains around 30%. Periodic ethnic, religious and political unrest lingers in some of the far-flung provinces, and can sometimes erupt even in Jakarta, as it did during the 1998 riots that toppled Suharto from power. Some of the provinces are demanding that Jakarta send more oil revenue their way. "The question is, what is serious and what is passing? For years Indonesia has been a relatively weak state, strong in some things it wanted to do and less so in others. The military has always shared power with the government," notes James Clad, an analyst with Cambridge Energy Research Associates and professor of Southeast Asian Studies at Georgetown University in Washington, D.C. During his brief tenure, Wahid has won kudos from the international community for trying to curb excesses, investigate corruption, tame wayward cabinet members, and reduce the military's influence on government and business. He is also making economic reforms demanded by the International Monetary Fund, while wooing international investment. Oil and gas provide up to a third of government revenues. Pertamina and its contractors have the capacity to produce about 1.5 million barrels of oil and 8.3 billion cubic feet (Bcf) of gas per day. As of June, its revised OPEC quota is 1.3 million barrels a day. Pertamina is also the world's largest marketer of liquefied natural gas, with several additional LNG plants under construction or planned. Pertamina faces numerous challenges. It must provide the population with the fuel it needs (while gradually reducing popular fuel subsidies by 2003), and simultaneously operate effectively at home and eventually, abroad. These ambitions come in the wake of a PricewaterhouseCoopers audit last year that uncovered financial mismanagement, alleged corruption and losses of US$4.7 billion between 1996 and 1998. Officials admit they have been frustrated in the past. Pertamina's internal structure and relationship with the government have not allowed it more independence, or much incentive to grow. The company and government are struggling to determine their future roles, and to separate cost centers from profit centers. "We have been trying to improve our business portfolio since 1994. That will probably speed up now," said new Pertamina senior vice president and director, exploration and production, Pak Gatot Wiroyudo, during an exclusive interview with Oil and Gas Investor at Pertamina headquarters in March. "In a way, the financial crisis was a blessing in disguise because it gave us the will to make changes we had been discussing since 1995. And as another incentive, the Asian Free Trade Agreement, like NAFTA, will take effect by 2003. "So, we have embarked on transforming the company. We are focusing first on its financial structure. If we can finish restructuring this year, we could enter new projects in 2001. We eventually intend to enter more international ventures." Pertamina officials have visited Vietnam, Cambodia and the Middle East looking for options, Gatot said. For now, however, Indonesia's strongest imperatives are to finalize more natural gas sales contracts and build a regional gas grid whose infrastructure can supply local and international markets. Arco has estimated a shortfall of 1.4 Bcf of gas a day in Indonesia by 2005. Sources suggest one big reason BP Amoco acquired Arco was for its rich Tangguh Field in Irian Jaya, eastern Indonesia, estimated to hold 13 Tcf of proved and probable reserves. Two of the main projects under way are the Conoco-led West Natuna gas field offshore and Santa Fe Snyder and Gulf Indonesia's blocks onshore Sumatra, directly south of Singapore. Natural gas from both regions will be shipped by pipeline across the Malacca Straits to Singapore's booming industrial and commercial markets. (See sidebar.) Pertamina and the operators in the region, which include Gulf Indonesia (formerly Asamera) and Santa Fe, are cooperating to implement a South Sumatra gas strategy. Certified gas reserves of more than 5 Tcf have been reported within existing discoveries. At press time, Pertamina, Santa Fe and Gulf Indonesia's contract with Singapore Power was still being negotiated while Santa Fe proceeds with its seismic and drilling programs. West Natuna, however, is expected to begin producing in spring 2001. It will supply 325 million cubic feet (MMcf) of gas per day to Sembawang Corp. in Singapore for 22 years. Santa Fe Snyder, which is merging with Devon Energy Corp. later this year, has been involved in Indonesia through predecessor companies since the 1970s. Since Santa Fe acquired Adobe Resources and its Indonesian subsidiary, Petromer Trend, in 1992, its activity has steadily increased, and with good results. It has tallied seven discoveries from eight wildcats, finding reserves totaling more than 300 million BOE, including 1 Tcf of gas on its Jabung Block alone. At year-end 1999, the Indonesian holdings contributed roughly 17% of the company's proved reserves and 15% of its production. One key attraction for Devon? Santa Fe's Indonesian production of approximately 40,000 BOE per day (gross) is expected to jump dramatically to about 145,000 BOE per day by 2004. The company plans more than 20 development wells, four wildcats and 10 workovers this year. One wildcat is the Gangsal prospect, a directional well that might tap into as much as 100 million barrels of reserves (unrisked). "Even if we strike out entirely on our exploration projects, we'll be at 120,000 barrels a day by 2004," says Larry D. Leavell, president, Santa Fe Energy Resources Southeast Asia, based in Jakarta. Today, Santa Fe holds interest in three large blocks on Sumatra (two of which it operates), one block in east Java, and two in Salawati (Island and Basin)-and big plans. Several more horizontal wells are planned in the Salawati Basin, where Santa Fe recently flow-tested a well at 3,000 barrels per day. Some offshore production facilities are planned in 2001 as well. At press time, however, Santa Fe was negotiating with interested buyers to sell these blocks, in order to focus on South Sumatra's Jabung and South Jambi B blocks, the heart of its Indonesian strategy. "These are our best blocks," says Leavell. And no wonder: Since 1995, the company has made seven discoveries on the Jabung Block alone, drilling more than 40 successful wells. Total proved reserves, net to the company, stand at about 25 million BOE, with another 66 million BOE of probable and possible reserves, according to DeGolyer and MacNaughton. From the 1940s, Total and Royal Dutch/Shell drilled 16 dry holes on Jabung, mostly based on surface geology, not seismic data. At that time, finding gas was considered a dry hole. What's more, these majors were of necessity looking for very large targets by chasing large basement highs, "whereas we can do well with 30 million barrels," notes Santa Fe Snyder International president Tim Parker. Santa Fe had a different interpretation of the geology as well. Explains vice president of exploration Jim Demarest in Jakarta: "In the midst of our acquisition of Adobe Trend, the Jabung Block came up for open tender, and since we had an Indonesian study group going, we knew something about it already. We bid 1,000 kilometers of seismic and three wells. Our belief was that the grabens were bigger and deeper than previous seismic interpretation had indicated. These Miocene-age marine shales are very hydrocarbon-rich. All the fields are lined up in lineaments, a series of structured ridges or horsts trending northwest to southeast. We thought migration was a significant issue also, and that we had to stay close to the source kitchens." That idea has borne fruit, as operators here find oil and gas from very shallow sands all the way to basement rock. In 1995 Santa Fe drilled the North Geragai field-opener on Jabung using old Shell seismic data. After four more discoveries on the block, cumulative gross reserves total about 300 million BOE. Santa Fe operates with a 30% stake; partners are Kerr-McGee, Amerada Hess and Pertamina-EP. Four horizontal wells completed this year at North Geragai each tested at producing rates of more than 1,600 barrels a day, twice the expected rate, says Joe Stein, general manager, Jabung Block. Total output from this field and the neighboring Makmur Field is about 17,000 barrels a day. With additional wells to be drilled or brought onstream there and in the nearby Betara Complex Phase 1, that number could reach 23,000 barrels per day by year-end. The liquids-rich crude can feed the strong Asian LPG market. Indeed, once its Sumatran plant is built, Santa Fe will be the second largest LPG producer in Indonesia. Due to the volumes expected, the company must build a pipeline off the northern coast of Sumatra in open waters, where it plans to lease a floating storage vessel to export LPG. The opportunity here is tremendous for a company of Santa Fe's size (and will remain so for the larger company it becomes with Devon). These Sumatran blocks cover about as much territory as half the Permian Basin of West Texas. "These are very prolific blocks," notes Parker. "We cannot expose ourselves to projects of similar size in the U.S., with the possible exception of the deepwater Gulf of Mexico. That's why we're focused internationally, to produce material growth." Santa Fe chairman and chief executive officer James L. Payne says, "These blocks could be our home run." Later this year at the Betara Complex, about 50 kilometers northwest of North Geragai, production will begin at the rate of 7,300 barrels a day, with peak output reaching 15,700 barrels per day by 2003. This will be from the North Betara, Northeast Betara and Gemah fields. And that's just Phase I of the huge four-phase, $600-million Betara project, which also includes condensate and natural gas liquids. Nearly 1 Tcf of gas and 108 million BOE wait, and Santa Fe may spend up to $75 million in 2000 alone. Santa Fe's seismic efforts on the Betara Complex's 34,000 acres have been prodigious as the company prepares to initiate the development plan, which was approved by Pertamina in January. It has employed 2,400 men in 34 seismic crews, subcontracted to Grant Geophysical of Houston, which supervises the turnkey contract. In 179 days starting last September, the crews drilled 2.2 million feet of shot holes to facilitate seismic coverage over 514 square kilometers. "The data quality are good and initial processing results indicate the survey objectives were achieved," reports Stein. Further processing should be completed in October. The opportunity remains significant in Indonesia for Santa Fe and all other operators. "Indonesia runs the risk of becoming a net importer of oil, but as a member of OPEC, they can't let that happen," notes Demarest. "There are so many undeveloped gas prospects already identified, that previously weren't economic, but now may be. Besides drilling, the upside for us is in marketing the gas that hasn't already been dedicated to Singapore Power." Natural gas is the cornerstone of Unocal Indonesia Co.'s plans also. In the deepwater Kutei Basin offshore east Kalimantan in the Makassar Strait, it holds 2.9 million acres, the equivalent of 500 blocks in the Gulf of Mexico. This area is benign in terms of weather and wave action, and the huge Bontang LNG plant-the largest in the world-is onshore nearby, ready to take the gas. Here Unocal is pursuing what it calls saturation exploration, or SX. "The idea is to drill as many inexpensive wells as you can in a concentrated area and really evaluate the formations. We explore based on 2-D and do our development based on 3-D," president Brian W.G. Marcotte explains. Indeed, of the 83 exploration and appraisal wells it has drilled to date, two-thirds have encountered hydrocarbons. Many of the wells were drilled with slimhole technology, which reduces costs. Key discoveries include the West Seno Field, with at least 210 million BOE, gross; and the Gada-Gula complex with 2- to 3 Tcf of gas, gross. "Our chief concern is the onset of our deepwater program at West Seno. It is the first deepwater field in Indonesia, in 3,500 feet of water," says Marcotte. Unocal is now preparing the tender documents for bidding on the development phase, Pertamina having approved the plan of development last September. At West Seno, Unocal plans to use a floating production unit, two mini tension leg platforms (TLPs) and subsea pipelines. Some 45 development wells are on tap. They should yield peak production of 60,000 barrels of oil and 150 MMcf of gas per day, probably in 2003. Although Conoco has been in Indonesia for about 30 years, the country is about to become a core area, says James D. McColgin, former president and general manager of the company's Indonesian unit in Jakarta. (At press time, he was transferred back to headquarters in Houston to accept a new position.) He was also most recently president of the Indonesian Petroleum Association, a group of producers and contractors that promotes understanding and development of the petroleum and geothermal industries. IPA sponsors many educational and technical conferences. A recent focus has been cost reduction and procurement practices in Indonesia. "A second thing we're working on is developing the gas markets. There is 170 Tcf proved here-that's a big number and a lot of that has no home yet. There is great potential to generate electricity with that gas, because Indonesia is about to eliminate the subsidy for diesel fuel. We think this country has tremendous potential to increase its gas production." Conoco will be doing its part in that effort. Its biggest project is operating the West Natuna gas field in the Natuna Sea, a part of the South China Sea east of Singapore, where Conoco has 3.7 million acres. Its West Natuna Block B is now producing 60,000 barrels of oil a day. But gas is king. Once the 300-mile, 28-inch subsea pipeline is completed, the company and its partners will, in 2001, start sending 325 MMcf a day to Sembawang Gas Co. in Singapore in a 22-year field-dedication contract. The pipeline's capacity is 750 million a day, allowing for much growth in gas shipments. "A lot of these fields were discovered in the 1970s but there never was an economic price for the gas until now," McColgin says. "We've been trying to build a gas market to justify this pipeline for 10 years.'' To fast-track activity, Conoco has developed a new technology, a movable offshore gas production unit, or Mogpu, which it will use in the Block B fields. For a relatively small cost, Conoco will be able to move the Mogpu as older reserves decline and new fields come onstream. Once the new steel gravity platform reaches a location it can be floated off the transportation vessel. It essentially becomes a barge capable of floating on its own buoyancy, Conoco says. Since the Mogpu is a fixed platform, there is no need for expensive risers or mooring systems. "It's the first of its kind in the world," says McColgin. "We have a number of smaller gas fields distributed over about 100 miles across the block, so we'll move this from field to field and deplete them in clusters with subsea tie-ins." The average wells in West Natuna are 6,000 feet deep and flow 15- to 20 MMcf a day. The reservoir shows porosities above 25% with permeability ranging from 500 millidarcies to more than 2 darcies. Conoco is still exploring the area as well as developing its finds so that production can begin in 2001. Four wildcats were scheduled on Block B this year, with Texaco and Inpex as partners. McColgin likens the play to the Gulf of Mexico shelf. Although Indonesia has been the province of very large companies in the past, there is room for small independents as well. One example is privately held Tradewinds Oil and Gas Inc. The Houston firm was founded in 1994 to pursue international E&P in China, Egypt and West Africa. Its main focus, however, is Indonesia, because CEO James E. Scott III loves the country and its warm people. He lived there for many years while working for Unocal and later, as exploration manager for Huffco Petroleum. Tradewinds' strategy is to pick up interests in old producing and nonproducing fields that Pertamina, other Indonesian operators or foreign companies no longer want. "We prefer producing properties with development, rehabilitation, improved oil recovery or enhancement opportunities, as well as those with an exploration component," he says. To that end, Tradewinds has been gathering momentum. Last September it acquired a carried interest in two fields operated by Calgary's Talisman Energy Inc. in South Sumatra, giving it immediate cash flow. Combined output is about 11,000 barrels a day. In December it bought a land rig in Kalimantan. It's now in discussions to sell it or form a joint venture in which Tradewinds would drill a well to earn an interest in another company's block. In February the company acquired 100% of the assets of Permin Tracer, a unit of Tracer Petroleum. The deal involves the 1.2-million-acre North Tanjung Block in the Barito Basin of southeast Kalimantan. The obligations on the block are substantial, so Tradewinds has submitted a new work plan and is negotiating to revise the PSC, which was about to expire. Eight to 10 wells were drilled in the past but there is no production on this block. The nearby Tanjung Field has produced more than 100 million barrels of oil since 1938. "If Pertamina agrees to extend the contract, and on favorable terms, it will speak volumes about how serious it is in attracting foreign operators," Scott says. In June, Tradewinds acquired two Indonesian subsidiaries of Calgary's Gulf Indonesia Holdings Ltd. The first owns 40% of a technical assistance contract (TAC) covering Ramok and Senabing oil fields in South Sumatra. These fields, found by the Dutch near the turn of the 20th century, are ripe for rehabilitation since they have not produced since 1942 when the Japanese invaded Indonesia. The other acquired entity holds 40% of a TAC covering Sukatani gas field in West Java. This field, discovered in 1982, wasn't produced for lack of market. "We think we can get these fields on production in about six months or so, but first we have to set surface facilities and do some workovers," Scott says. Tradewinds also plans to use its proprietary satellite imagery techniques and perform a geochemical survey. "The real story here is that a small Houston company that sees the opportunities in Indonesia and has analyzed the economic and political risks, considers it good to be involved. The benefits outweigh the risks. We're just delighted to be here." A DASH FOR INDONESIAN GAS One of the biggest challenges facing producers in Indonesia is building markets for all the natural gas they will develop during the next decade. Lately, it seems new discoveries are announced weekly. In 1999 alone, Conoco made five offshore discoveries in West Natuna that doubled its Indonesian gas reserves. Unocal's latest finds on its deepwater Ganal PSC off East Kalimantan are thought to hold 2- to 3 trillion cubic feet (Tcf) of gas. Experts think South Sumatra, where Santa Fe Snyder and Gulf Indonesia Resources operate, holds 5 Tcf of gas in existing fields. Lasmo is looking for partners to develop what it calls a multi-Tcf, Kreung Mane PSC offshore northern Sumatra. And longer term, Exxon Mobil's Natuna Field holds at least 30 Tcf. Buyers include Japan, South Korea, Taiwan, Singapore, Malaysia and China, through either natural gas by subsea pipeline or LNG via tankers. The world's largest LNG plant, Bontang, lies on East Kalimantan, where operators are finding more reserves onshore and offshore. "You're talking about multiple billions of dollars for Indonesia," sums up Gulf Indonesia president Bill Fanagan. The company is a major operator on Sumatra's Corridor and South Jambi B blocks. Santa Fe recently acquired 30% of the latter. Singapore is the largest and most immediate market for South Sumatran gas. As the city-state of 3 million people deregulates gas markets and tries to wean itself from fuel oil, gas-fired power generation will play a much bigger role. Singapore Power has been privatized. By 2003, the subsidies on diesel fuel will end, making gas even more competitive. Three Sumatran blocks will provide gas to Singapore Power starting in 2003, if negotiations are completed later this year as hoped. Gulf Indonesia's Corridor and South Jambi B blocks and Santa Fe's Jabung Block are involved. Pertamina and the companies have been negotiating for nearly two years to conclude the gas sales contract; authorities now estimate a final sales and transportation deal will be signed later this fall. By contract, sales must begin 30 months after a definitive agreement is reached. Santa Fe has begun laying pipeline this year through the Sumatran jungles and fields covering its acreage. In total, some 2.27 Tcf of gas in the next 20 years will be shipped, with initial deliveries of 150 million cubic feet (MMcf) per day. "We're cooperating to develop the market and at the same time, competing for our share of it," sums up Santa Fe's Jim Demarest, vice president of exploration, in Jakarta. Singapore is "leasing" Batam Island from Indonesia for a massive industrial and petrochemical complex where currently, 10,000 construction workers are busy on a $5-billion landfill project that ties a series of tiny islands together. "When I arrived here three years ago, all the pipeline proposals were thought to be in the far distant future, but now, most are under construction," notes Kelly Cope, Santa Fe vice president, legal, who heads up the company's gas marketing efforts in Jakarta. "A real battle is shaping up as to whether Singapore or Kuala Lumpur gets to be the gas hub in this region." Some see competition looming between Conoco's West Natuna Group and the South Sumatra blocks, but Santa Fe Energy Resources Southeast Asia's president, Larry D. Leavell, thinks there will be enough gas demand in the future to take gas from both projects. However, there are many challenges ahead. "The buyers in Singapore are cautious because it could be as much as $7 billion over the course of 20 years. It never goes as quickly as you'd want," says Fanagan. One analyst, Gavin Law of Wood Mackenzie, thinks Singapore has been stringing along the major producers in hopes of getting the lowest price for the gas. And he questions whether there is really enough market demand for all the gas that is being developed currently. "The buyer is king and everyone is courting Singapore, so it would be clever of them to keep people on the hook." The West Natuna Group, of which Conoco is operator and Premier Oil and Gulf Indonesia Resources are partners, has signed a 22-year sales contract to sell 325 MMcf a day to Singapore's Sembawang Gas Co. The latter has estimated that Singapore's gas demand may reach 1 Bcf a day by 2010. Last January workers began laying a new 300-mile subsea line, with production scheduled to begin in mid-2001-the first export sale of pipelined gas from Indonesia. Meanwhile, Sumatran gas demand is set to grow also as gas increasingly replaces subsidized diesel fuel, and it powers the many plywood plants and several proposed independent power plants. CHANGES AT PERTAMINA Indonesian President Abdurrahman Wahid gained nods of approval from Jakarta's oil and gas community when in March 2000, he appointed Baihaki Hakim as the new head of Pertamina. For the first time, this key appointment was drawn from the ranks of the producer community, rather than from within Pertamina or other government agencies. Baihaki was previously president of Caltex Pacific Indonesia. Too, there is a totally new slate of six executive directors of Pertamina. "I am very optimistic-this man [Baihaki] understands foreign contractor needs. He's been there," says Larry D. Leavell, president of Santa Fe Energy Resources Southeast Asia, based in Jakarta. "And President Wahid is a moderate and a bridge-builder. The first thing he made known was his priority to boost the economy and unify the nation." Adds Bill Fanagan, president of Gulf Indonesia Resources Ltd., "I see Wahid as an extremely interesting character who will produce surprises...I find him refreshing. And the changes at Pertamina are definitely positive." Unocal Indonesia president Brian W.G. Marcotte also likes what he sees, but cautions that companies must be patient. "By reputation, Baihaki is viewed with high regard. He's worked the issues so he knows the impact government policies can have. I would expect him to streamline some of the processes. But it takes time. One government minister told us that the chef, the recipe and the ingredients have changed. But we are seeing lots of good signs." Pertamina is considering several reforms. Chief among them is separating its three main functions: oil and gas activities as a partner or operator, regulation of the industry, and social functions such as subsidizing diesel fuel for the population. The latter is sensitive. Can subsidies be handled properly without hurting the producers or angering the public? Where does government service end and for-profit operations begin? It is also taking over management of some older fields once the contracts with foreign partners expire. At the center of this idea is a real plum, Caltex Pacific's Coastal Plains Pekanbaru Field in Riau province, central Sumatra, which produces 70,000 barrels a day. At press time, Caltex and Pertamina were still negotiating their respective shares once the contract expires in August 2001. Complicating matters, the government of Riau is now demanding a majority share. This past May, the government approved of Pertamina taking full charge of certain offshore exploration and exploitation projects in the Makassar Strait. This is the first time the company has been allowed to operate without requiring partners that reduce risk.