Bojonegoro reluctant to share Cepu block revenue

Blontank Poer, The Jakarta Post, Bojonegoro, East Java

State oil and gas firm Pertamina's stance over the oil-rich, but still untapped, Cepu block continues to draw criticism.

Following a rejection from the government over Pertamina's requests for higher revenue splits, Bojonegoro regency, where part of the block lies, has now begun criticizing Pertamina for proposing that the allocated revenue for local administrations should be divided among the three regencies where the block is located.

"The oil is located in Bojonegoro regency. It does not make sense to split the revenues with other regencies," Bojonegoro regent Mochamad Santoso claimed on Thursday.

He made the remarks in response to a statement by Pertamina president Widya Purnama, who said on Monday that the 10 percent split for local administrations would be divided between Bojonegoro, Blora and Tuban regencies.

Officials from Blora and Tuban regencies are yet to give comments on the issue.

Widya also asserted that the company would hold 55 percent of the voting rights -- comprising 45 percent of its participating interest and the 10 percent of the shares given to local administrations, while it requested a contractor's split of 40 percent of the oil produced from Cepu.

However, Pertamina's assertion was turned down by the government on Tuesday, with its negotiating team spokesman Rizal Mallarangeng saying that Pertamina should respect the sanctity of the memorandum of understanding (MOU) signed between Exxon and the negotiating team on June 25.

Under the signed MOU, stakeholders -- Pertamina, Exxon and regency administrations -- will get 15 percent of all output and the government 85 percent if oil prices averaged over US$45 in a year. If the price of oil falls below $35 it would be a 30-70 split.

Cepu is expected to produce 170,000 barrels of crude oil per day when it reaches peak production, about 18 percent of current nationwide output.

Santoso said regency-owned enterprise PT Asri Dharma Sejahtera had signed a partnership deal with PT Surya Energi Raya, which belongs to media magnate Surya Paloh, on June 5 to help manage the 10 percent share from the block.

Under the deal, Surya Energi will provide $2.4 billion, with the exchange rate set at Rp 9,500 per U.S. dollar, and in return it will get 75 percent of Asri's revenues from the production.

However, Santoso does not yet know the estimated proceeds from the block.

"Surely, the revenue will be enough to cover the regency's expenditures," he added.

At present, Bojonegoro spends an estimated Rp 439 billion (US$44.77 million) while current revenues only stand at Rp 36 billion.

The huge deficit places Bojonegoro as the second poorest regency in East Java province after Sampang regency on Madura island.