C. Java, E. Java set up a consortium for Cepu block

ID Nugroho and Suherdjoko, The Jakarta Post, Surabaya/Semarang

The East Java administration will get a bigger share in participating interest compared to neighbor Central Java from the untapped Cepu block, as a result of a meeting between the governors of the two provinces presided over by the President.

East Java Governor Imam Utomo said in capital Surabaya that the province would get 6.7 percent of the total 10 percent allocated for regional administrations while Central Java would get the rest.

The meeting held late on Tuesday was also attended by Central Java Governor Mardiyanto, President Susilo Bambang Yudhoyono, Cabinet Secretary Sudi Silalahi and Minister of Energy and Mineral Resources Purnomo Yusgiantoro.

The President expressed hope in the meeting that the block, located on the border of the two provinces, would be productive in 2008.

"The President emphasized that any policies made on the Cepu block should be for the benefit and welfare of the people," Mardiyanto said separately in Semarang, Central Java.

Sudi said the details would be discussed further based on Article 34 of Law No. 35 on oil and gas.

"The government will issue a presidential regulation to stipulate the details of the split," he said.

Both Central Java and East Java administrations have also agreed to set up a consortium to handle the 10 percent revenue of their interest participation in Cepu block and the sharing capital.

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

Both Pertamina and Exxon also agreed on a participating interest of 50 percent in the Cepu block, with 5 percent allocated to each of the relevant local administrations.

Part of the Cepu block is in Blora regency, Central Java, with 895 million barrels of oil reserves while another part is in Bojonegoro regency, East Java, with over 1.5 billion barrels of reserves.

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

Bojonegoro had demanded that the government not split the revenue with other regencies, as most of Cepu block lies in this area.

Mardiyanto said both provinces' administrations as well as the administrations of Bojonegoro and Blora had agreed to provide sharing capital of Rp 2.5 trillion (US$255.10 million), mainly due to their limited regional budgets.