Exxon may choose joint venture scheme for Cepu
Fitri Wulandari, The Jakarta Post, Jakarta
U.S. energy firm ExxonMobil Oil Indonesia has hinted that it is likely to choose an equal joint venture to develop the huge oil and gas reserves of the Cepu block in Central and East Java.
ExxonMobil spokeswoman Deva Rachman said the company's technical staff had worked together with Pertamina to analyze several options to resolve the contractual issues.
"Negotiation are still ongoing. The scenarios analyzed anticipate that Pertamina would share proportionately in future investment," Deva said.
Previously, state oil and gas firm Pertamina proposed to ExxonMobil a joint venture scheme to manage the Cepu blocks once the latter's contract expired in 2010.
In the proposed scheme, Pertamina and ExxonMobil would split equally 40 percent shares in the block. The remaining 60 percent of the shares would go to the government.
Pertamina and ExxonMobil have been for years at odds over the contract on the block.
ExxonMobil has been seeking to extend for another 20 years its contract on the block, which expires in 2010, to allow it to fully exploit Cepu's giant oil reserves it discovered about one- and-a-half years ago.
The block is estimated to have a potential reserves of two billion barrels of oil and 11 trillion cubic feet (TCF) of potential gas reserves.
PT Humpus Patragas, a company owned by the youngest son of former president Soeharto, Hutomo "Tommy" Mandala Putra, acquired the Cepu block from Pertamina in the early 1990s. The company later operated it under a technical assistance contract (TAC), but sold its entire stake in the block to ExxonMobil in 1999.
A TAC is an agreement between Pertamina and an oil and gas investor, allowing the latter to work in Pertamina's working area to rehabilitate the existing wells or fields.
When the huge oil and gas reserves were discovered, ExxonMobil asked for an extension of its contracts until 2030.
"ExxonMobil remains optimistic that an equitable solution to the remaining contractual issues will be reached in the near future," Deva remarked.
Deva also clarified allegations by BPKP (the internal audit agency) and Pertamina on the operating costs spent by ExxonMobil in Cepu.
BPKP said only $142 million of the total investment cost of $459 million, which ExxonMobil claimed to have spent in 2002, could be accounted for.
Deva insisted that ExxonMobil subsidiaries in Indonesia had spent in excess of $450 million for acquiring, exploring and planning for the development of resources covered by the Cepu TAC.
"All of our expenditure to date is supported by legitimate documentation and is subject to audit," Deva asserted.
Of the $450 million, a substantial portion has already been validated through the normal Indonesian audit process as required by oil and gas cooperation contracts, while "the remaining cost will be subject to similar review," Deva said.
However, Deva declined to mention how much of the figure had been audited.
Under the existing contract, ExxonMobil can recover expenditure it has made on the block. The expenditure will be deducted from the output of the block. Thus, the higher the expenditure, the lower the oil revenue to be received by the government.