Exxon told to explore before extend contract

Exxon told to explore before extend contract

Bloomberg, Jakarta

Exxon Mobil Corp. should start exploring for oil in the Cepu field in Central Java if it wants its contract extended for 20 years, said Mustiko Saleh, a vice president with Indonesian state oil and gas company Pertamina.

"If Exxon wants its contract extended, it should fulfill its existing contract with us," Mustiko told reporters over the weekend at an energy conference.

No exploration has begun in the Cepu field, which Exxon estimates may produce as much as 170,000 barrels of oil a day. Exxon earlier said it did not want to invest more money in the field until the contract was extended.

The government, anxious to develop the nation's oil reserves, last month asked Pertamina to restart negotiations with the U.S. oil company after talks broke down in a dispute dating back three years.

Pertamina earlier wanted US$400 million from Exxon to extend the contract and for Exxon to give up half of its 35 percent share of oil produced from the field. Exxon offered Pertamina $85 million in cash with other benefits.

Pertamina said in December it was willing to resume talks after turning down Exxon's request in August to extend its contract at the Cepu field through 2030. The current contract expires in 2010.

The field would add about 18 percent to Indonesia's current oil output, helping to stem a production decline that averaged more than 5 percent annually in the past five years.