Govt, expert at odds over impact of Cepu contract<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The government sees no problem with Pertamina's decision not
\nto extend ExxonMobil's contract on the Cepu block, but an expert
\nwarned on Thursday that the decision would further hurt the
\ncountry's investment climate.<\/p>\n
Oil and gas authority BP Migas' chairman, Rachmat Sudibyo,
\nsaid on Thursday that Pertamina's decision would not bring an
\nadverse impact on the country's investment climate since the
\ndecision was legally acceptable.<\/p>\n
\"There won't be a problem if a contract is extended or not. A
\nproblem will only arise if a contract is terminated before its
\nexpiry date,\" Rachmat was quoted by Antara as saying.<\/p>\n
However, Gatot K. Wiroyudho, the former director of
\nPertamina's division in charge of the supervision of oil and gas
\ncontractors, said Pertamina's decision had undermined the
\ngovernment's efforts to build a conducive investment climate in
\nthe country.<\/p>\n
\"The decision has sent a poor signal to foreign investors now
\noperating in Indonesia as well as those willing to come,\" Gatot
\ntold The Jakarta Post.<\/p>\n
Pertamina's new president Widya Purnama recently announced,
\nthat it had decided not to extend ExxonMobil's contract on the
\nCepu block and would operate the block by itself after
\nExxonMobil's contract expires in 2010.<\/p>\n
ExxonMobil has invested hundreds of millions of U.S. dollars
\nto find more than 600 million barrels of oil and between 700
\nbillion and 1.25 trillion cubic feet of natural gas in the block,
\nlocated on the border areas of Central and East Java.<\/p>\n
ExxonMobil and Pertamina signed a head of agreement that would
\npave the way for both firms to set up a joint venture to operate
\nthe block after 2010 in July. The head of agreement was subject
\nto an approval from the government.<\/p>\n
However, rather than approving the head of agreement, the
\ngovernment reshuffled Pertamina's management in August.<\/p>\n
The government is reportedly not satisfied with the amount of
\ncompensation offered by ExxonMobil to Pertamina in return for the
\nextension of the contract. The compensation totalled US$400
\nmillion in grants and technical assistance.<\/p>\n
Rumors in the industry that Chinese oil firms, which are now
\naggressively expanding their business in Indonesia, have
\napproached Pertamina to jointly develop the block, offering a
\nlarger amount of compensation to the firm.<\/p>\n
ExxonMobil has planned to invest more than $2 billion to
\nextract the oil and gas deposits in the Cepu block.<\/p>\n
The firm expected to produce 165,000 barrels of oil per day
\nstarting in 2006, from which the government will earn $2 million
\nper day in revenue shares.<\/p>\n
Pertamina meanwhile promised to start production on the block
\nin 2012.<\/p>\n
Gatot acknowledged that legally, Pertamina committed no wrong
\nwith its decision not to extend the contract, but, he said, a
\nlong-term contract, such as the one owned by ExxonMobil, should
\nbe treated with \"greater flexibility\" rather than with a strict
\nlegal approach.<\/p>\n
\"If, for example, Pertamina invests in Iraq and has spent a
\nlot of money to find a significant oil deposit but could not
\nexploit the deposit because its contract is going to expire, the
\nfirm will certainly be very disappointed,\" Gatot explained.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-expert-at-odds-over-impact-of-cepu-contract-1447899208",
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"sponsor": "Okusi Associates",
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