Exxon case close to settlement, Kalla says
The Jakarta Post, Jakarta
U.S. energy giant ExxonMobil Corp. may accept the revenue sharing scheme proposed by the government and end its prolonged row with state oil and gas firm PT Pertamina in developing the oil-rich Cepu block, according to Vice President Jusuf Kalla.
Kalla was confirming reports in several local media outlets that the government may agree to pay ExxonMobil 13.5 percent of the revenue derived from the block, which is less than the usual 15 percent share for the contractor.
"The final result will be that figure (13.5 percent). There is a formula to calculate the (revenue) split, but the end result will be more or less similar to that," he said after attending Friday prayers at his office.
Kalla said the government was hoping to wrap up the negotiations with ExxonMobil with a view to extending the company's contract for developing the field as well as the revenue composition split within the next one or two days.
With that, the government will gain a 70 percent share of the revenue, with the remaining 30 percent allocated for the field contractors, in this case Pertamina and ExxonMobil, as well as the local administration.
It is expected that the Pertamina share will be the same as that offered to ExxonMobil, with the local administration expected to obtain the rest.
The Cepu block -- located on the border between Central Java and East Java and owned by Pertamina but operated by ExxonMobil Indonesia under a technical assistance contract (TAC) -- has vast oil reserves.
The block is estimated to contain two billion barrels of potential oil reserves and 11 trillion cubic feet of potential gas reserves, which is expected to increase Indonesia's oil output by 18 percent. Output has been declining over the last five years.
ExxonMobil has said that the block could produce oil at a rate of 170,000 barrels per day (bpd). The block is expected to start producing oil by 2008.
However, the development of the block has been stalled since 2001 as negotiations between ExxonMobil and Pertamina continued on, among other things, a contract extension and revenue split.
Aside from the revenue split, ExxonMobil has also agreed to pay compensation amounting to US$400 million for the contract extension, said Rizal Mallarangeng, spokesman for the government- sponsored negotiating team working on the Cepu dispute, on a separate occasion.
"They (ExxonMobil) will pay $70 million right after the (contract) signing while the rest will be paid within three years," he said.
However, he said that the bonus would not be factored into cost recovery from developing the block.
Should everything go according to plan and the contract is signed this year, ExxonMobil will be able to extract oil from the block until 2035.
"The new contract will be valid for 30 years from the time of signing," said Lin Che Wei, another member of the negotiating team.
ExxonMobil's current contract with Pertamina, which expires in 2010, will be automatically terminated. The new contract will take the form of a production sharing contract (PSC) scheme, as the current oil and gas law no longer recognizes TACs.