ExxonMobil promises billions in benefits for Cepu<\/p>\n
Endy M. Bayuni, The Jakarta Post, Jakarta<\/p>\n
ExxonMobil Corp, which has been locked in negotiations with
\nthe Indonesian government to develop a huge oil field in East
\nJava, says it plans to spend $2 billion on the project.<\/p>\n
That money will include building infrastructure, creating jobs
\nfor the locals, and bringing in other social benefits like
\nschools and medical clinics to the area.<\/p>\n
The Texas-based oil giant says it could get the field in Cepu
\nto start producing within three years after it gets the go ahead,
\nand potentially reaches full capacity of up to 170,000 barrels
\nper day during that time.<\/p>\n
That, according to ExxonMobil President Rex Tillerson, would
\nbolster Indonesia's crude oil production by about 20 percent from
\nits present capacity.<\/p>\n
Using the conservative government assumption of $35 a barrel
\nfor the oil price, on average, for 2005, Cepu could bring in $1.5
\nbillion in extra revenue a year to Indonesia, he said.<\/p>\n
\"It will have a huge impact on the oil supply for Indonesia,
\nbut also for its oil export,\" Tillerson said in an interview with
\nThe Jakarta Post and Kompas on Monday.<\/p>\n
In town for the major oil and gas conference this week,
\nTillerson used the opportunity to meet with Indonesian officials
\nto discuss the fate of the Cepu field as well as ExxonMobil's
\nactivities in Indonesia.<\/p>\n
ExxonMobil struck oil in Cepu in 2001 with reserves estimated
\nat 600 million barrels, making it the largest oil discovery in
\nIndonesia in the last three decades. However, the company has
\nbeen seeking to extend its concession beyond the present 2010
\nbefore investing in and developing the field.<\/p>\n
Indonesia, for its part, had demanded a greater share of the
\noil from Cepu. An initial agreement to jointly develop the field
\non a 50-50 basis with Pertamina had been signed, but the two
\nsides are still in a dispute over the amount of money the state
\noil giant has to reimburse ExxonMobil. Pertamina is disputing
\nExxon's claims that it spent $450 million to discover the field.<\/p>\n
Pressed for hard currency, pressure is mounting on Jakarta to
\ncompromise. Indonesia's oil production has been declining in the
\nabsence of new oil discoveries. It has also not been able to
\nproduce its 1.3 million OPEC production quota, and rising
\ndomestic fuel consumption has turned Indonesia into a net oil
\nimporter.<\/p>\n
President Susilo Bambang Yudhoyono wants the dispute with
\nExxonMobil resolved as part of his government's strategy to
\nimprove Indonesia's reputation among foreign investors.<\/p>\n
\"We understand how important Cepu is to the country. It's
\nimportant to us. We've risked a lot of money out there to find
\nit,\" Tillerson said. \"We want to move on with the development.\"<\/p>\n
He was particularly encouraged with the new government,
\nnoticing that negotiations, which stalled under President
\nMegawati Soekarnoputri, had resumed.<\/p>\n
The choice for Indonesia, as one senior Cabinet member puts
\nit, boils down to either having the field developed now and
\nreaping the benefits, or letting Exxon's concession expire in
\n2010 and developing the field itself, gaining 10 or 20 percent
\nmore of the revenue some 10 years later.<\/p>\n
ExxonMobil is already in an advance stage in its plan to
\ndevelop the Cepu field, and that includes plans to build roads
\nand other infrastructure, create jobs for the people in the
\nregion, and build social service facilities like schools and
\nclinics.<\/p>\n
Tillerson pointed out that ExxonMobil's experience in managing
\nthe Arun gas field in Aceh was proof that they could bring
\nbenefits to the people.<\/p>\n
\"In Aceh, we have treated over two million people at our
\nclinic. That's an extraordinary figure,\" he said.<\/p>\n
ExxonMobil has been operating in Indonesia since 1898 under
\ndifferent names like Esso and Mobil. Today, its activities are
\nintegrated under ExxonMobil Oil Indonesia Inc, which operates the
\nArun gas field and is also developing the huge gas field near the
\nNatuna Islands in the South China Sea.<\/p>\n
Tillerson praised the new government in Jakarta for
\nrecognizing the need to make the oil and gas sector more
\nattractive to foreign oil companies, and to reduce the
\nbureaucratic processes that have deterred investors in recent
\nyears.<\/p>\n
\"There may be some further improvement needed. There is a good
\ndialog with the industry,\" he said.<\/p>\n
Indonesia needed to make the process of awarding concessions
\nmore transparent as well as competitive, he said. \"The rules can
\nbe what the rules are. As long as we know what they are, and that
\nthey are the same for everyone...\"<\/p>\n
Tillerson cited a recent survey -- which ranked Indonesia near
\nthe bottom in terms of attractiveness for oil investors -- as one
\nreason for the government to review its oil policy and make the
\nhuge risk of exploring for oil in Indonesia more rewarding.<\/p>\n
\"The real fundamental issue is how the government wants to set
\nthe terms to provide the opportunity to share in the successes,\"
\nhe said. \"The failures (of discovering oil) are ours, it doesn't
\ncost the government anything.\"<\/p>",
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"sponsor": "Okusi Associates",
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