10 percent stake in Cepu not enough: Pertamina

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)