10 percent stake in Cepu not enough: Pertamina

JAKARTA (JP): State oil and gas company Pertamina said on Friday it was demanding more than a 10 percent stake in a joint venture with U.S-based ExxonMobil Oil Inc. for the development of enormous oil reserves in the Cepu block, located in Central Java and East Java.

Pertamina president Baihaki Hakim said he wanted a more equitable share, citing that the Cepu block was originally owned by Pertamina before being transferred to Humpuss Patragas in what he called a "hostile takeover".

The block was later bought out by ExxonMobil.

"The point is, we want more ... I'm not satisfied with 10 percent," Baihaki told reporters following a presentation of Pertamina's restructuring programs.

His statement contradicts ExxonMobil's claim last week that Pertamina had agreed to accept a 10 percent stake in the project.

Baihaki declined to disclose how much Pertamina was demanding during negotiations with ExxonMobil.

Last week, ExxonMobil said it recently discovered oil reserves with an estimated capacity of 250 million barrels in its Cepu contract area.

ExxonMobil's officials are tight-lipped over details regarding Cepu's production forecasts and the current negotiations with Pertamina.

According to one source, ExxonMobil hopes to produce around 100,000 barrels per day (bpd) by the year 2004.

The company's unit, Cepu Mobil Limited, develops the Cepu blocks under a Technical Assistance Contract (TAC) with Pertamina.

A TAC usually covers oil fields that have either stopped production or have been abandoned by large companies after being deemed economically unviable.

Yet, to small companies with lower production costs, these oil fields may still be attractive.

The TAC system, however, gained a bad reputation after politically-connected business people allegedly abused the contract system to enter the oil and gas sector and make quick profits by acting as brokers.

Some people managed to obtain TACs in the past, despite the blocks still operating.

One such case, currently under investigation, concerns PT Ustraindo Petro Gas, which is controlled by former president Soeharto's son Bambang Trihatmodjo. This company was accused of obtaining four TACs from Pertamina in 1992 and 1993 while the fields were still in production.

The case implicates former ministers of mines and energy IB Sudjana and Ginandjar Kartasasmita, both of whom have been named suspects by the Attorney General's Office.

Pertamina transferred Cepu to PT Humpuss Patragas in 1990, which at the time was controlled by Soeharto's youngest son, Hutomo Mandala Putra.

Humpuss later sold 49 percent of the block to a unit of ExxonMobil, Australian firm Ampolex Pty Ltd.

But, Humpuss sold its remaining 51 percent stake to ExxonMobil last year amid the anti-corruption campaigns launched by the administration of BJ Habibie, who replaced Soeharto in 1998.

"I want Pertamina's stolen rights back," Baihaki said without further elaboration.

According to him, ExxonMobil should have known about the dubious ways in which Humpuss acquired the Cepu block from Pertamina.

"You (ExxonMobil) may not be guilty, but as an world-leading company you should be well aware of business ethics," he said.

Baihaki added that he would not allow ExxonMobil to extend its Cepu contract unless there was clarity regarding transfer of the block's ownership.

"I don't want my signature as a Pertamina president (on the contractual extension) result in me ending up in the Attorney General's Office," he said.

Baihaki said Pertamina planned to raise oil production from its own operations to 200,000 bpd, from the current 80,000 bpd, within five years.

A significant interest in the Cepu block is seen as crucial to achieving that production target, he said.

Pertamina is also close to controlling the large Coastal Plain Pekanbaru (CPP) oil block in Riau, currently owned by PT Caltex Pacific Indonesia.

Pertamina is coveting a 90 percent stake in the CPP block, which produces between 50,000 to 60,000 bpd. The government has allocated the remaining shares to a local-government-owned Riau company.

Other opportunities will arise from the development of promising oil and gas reserves in the Makassar Straits off East Kalimantan.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro has said that Pertamina held a good chance of acquiring a 20 to 25 percent stake in a consortium developing those large reserves. (bkm)