More adjusted splits may soon be in place<\/p>\n
Leony Aurora, The Jakarta Post, Jakarta<\/p>\n
With government and U.S. energy giant ExxonMobil agreeing last
\nweek in principle to a new contract splitting production from the
\nCepu oil block in line with global oil prices, petroleum firms
\noperating here are considering similar deals, the head of the
\nIndonesian Petroleum Association (IPA) says.<\/p>\n
IPA executive director Suyitno Patmo Sukismo said the IPA
\nplanned to ask the government whether the newly introduced
\nscheme, which would split production on a scale adjusted to
\ninternational oil prices, was applicable only to Cepu.<\/p>\n
\"If the government wants to offer (such a scheme), we will
\nstudy the possibilities,\" said Suyitno on the sidelines of an
\nenergy seminar on Monday.<\/p>\n
Commenting on the issue, chairman of the Oil and Gas Upstream
\nRegulatory Agency (BP Migas) Kardaya Warnika said that only new
\ncontracts would be able to use adjusted, rather that fixed,
\nfluctuating production splits.<\/p>\n
\"It's up to both parties (the government and contractors),\"
\nKardaya said.<\/p>\n
\"If (the system was used) in a contract extension, we could
\ndiscuss (the possibility).\"<\/p>\n
However, the existing contracts would remain as they were,
\nKardaya said. \"We have to honor the contract sanctity.\"<\/p>\n
Indonesia and Exxon have ended their four-year dispute on the
\ndevelopment of Cepu, an oil-rich but largely untapped oil block
\nlocated on the borders of Central Java and East Java, signing a
\nprincipal agreement on Saturday.<\/p>\n
The agreement gives 85 percent of production totals to the
\ngovernment and 15 percent to contractors if oil prices average
\nmore than US$45 a barrel in a year.<\/p>\n
However, should oil prices fall to below $35 a barrel in any
\ngiven year, the government will get a lower share of 70 percent
\nfrom the oil output, leaving contractors a bigger portion of 30
\npercent.<\/p>\n
Such a fluctuating split scheme is the first to be introduced
\nin Indonesia. The block will be jointly managed by Exxon,
\nPertamina and the regional administrations.<\/p>\n
British energy giant BP Plc's head of energy analysis Michael
\nSmith said that it was a good idea to tie a production split to
\noil prices.<\/p>\n
\"With lower prices, the (contractor) company gets a somewhat
\nhigher take,\" he said. \"In general that is a good idea.\"<\/p>\n
Indonesia, with its increasing domestic demand and a steadily
\ndeclining oil output, is pinning its hopes on the development of
\nthe Cepu block, which is predicted to produce some 170,000
\nbarrels of oil per day (bpd) at its peak.<\/p>\n
Domestic crude and condensate output hovers at slightly above
\n1 million bpd at present, lower than the 1.52 million bpd enjoyed
\nin the late 1990s.<\/p>\n
Smith said that it would be difficult for Indonesia to
\nincrease its output, as productive oil fields had been thoroughly
\nexplored and had passed their peaks.<\/p>\n
\"Government efforts may alter the path of the decline but they
\nwill not stop it,\" he said.<\/p>\n
The only answer to the country's oil problems was to attract
\nmore investors to the sector by eliminating trade barriers and
\nimposing appropriate legal and contractual terms, he said.<\/p>",
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"sponsor": "Okusi Associates",
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