ExxonMobil insists on holding Cepu operatorship

ExxonMobil insists on holding Cepu operatorship

The Jakarta Post
Jakarta

U.S. oil giant ExxonMobil Corp. has vowed to fight for the
operatorship of the oil-rich Cepu block following a recent move
by the government to revive the negotiating team to end the
continuing tug-of-war between the company and state oil firm
Pertamina.

ExxonMobil Oil Indonesia Inc. president director Peter J.
Coleman told reporters here on Sunday that his company would
continue to stick to the memorandum of understanding (MOU) signed
in June by the two companies and the government-sanctioned
negotiating team that granted ExxonMobil the right to be the sole
operator of the block for the entire duration of the contract.

"ExxonMobil will continue to hold out that position (as sole
operator)," Coleman said. "Let's go back to that (MOU), that's
the basis, and we are ready to move forward."

"We are committed to continuing to negotiate; we are committed
to trying to understand that Pertamina has concerns with the
proposal we have put forward."

Based on the proposal, which ExxonMobil considered to be
consistent with the MOU, Pertamina and ExxonMobil would be
equally represented in a supervisory body to Mobil Cepu Ltd.
(MCL), which ExxonMobil established to build and operate Cepu.

The supervisory body would oversee MCL and have authority in
approving budgets and major expenditures.

Pertamina, however, was apparently unhappy with this proposal,
and wants a larger role in the operational side.

Responding to Pertamina's concerns, ExxonMobil, according to
Coleman, offered Pertamina some senior positions in MCL,
including as deputy manager of the development process, who would
be the second-in-charge of the operation.

Pertamina was again unhappy, and even demanded that it be
given operatorship status. Pertamina had also said that
ExxonMobil could no longer demand sole operatorship as the MOU
had expired, arguing that it was valid only for 90 days from the
day of signing.

But ExxonMobil maintains that the MOU was still valid, noting
that the 90-day stipulation was for Pertamina to report to an
inter-departmental steering committee which oversees Pertamina in
the negotiation. Exxon does not report to the steering committee.

To break through the new stalemate, the government has decided
to revive the special inter-ministerial negotiating team, which
in June managed to get both firms to sign an MOU to develop the
block, ending a four-year dispute.

The team also managed to get the two companies to sign a
production sharing contract with the government on Sept. 17 to
develop the US$2.6 billion Cepu block, which contains estimated
reserves of 500 million barrels of crude oil.

This time, according to State Minister of State Enterprise
Sugiharto said, the team would settle the operatorship issue.

One possibility in settling the dispute, according to
Sugiharto, would be to establish a joint venture company to build
and operate Cepu, but this idea was rejected by ExxonMobil.

Coleman argued that establishing such a joint-venture company
would just "delay the project" as it would take longer to get the
legal work done as well as to recruit new employees.

More importantly, Coleman said, "It's a matter of
accountability. We feel that if there is one company, that
company will be accountable for the results. When that company is
ExxonMobil, ExxonMobil worldwide will be accountable for those
results. We will bring in all resources from around the world,
i.e. technology and people, to make sure that the company
delivers."