ExxonMobil likely to get Cepu contract extension
Urip Hudiono, The Jakarta Post/Jakarta
State oil and gas firm PT Pertamina is expected to extend U.S.- based ExxonMobil Oil's contract for the Cepu block, which is currently being negotiated.
"We appreciate what ExxonMobil has done (with the block), so we will extend the contract, if possible, without having to wait until the contract ends in 2010," Pertamina's chief commissioner, Martiono Hadianto, said on Friday.
However, he said if the contract was extended, it would have to be drawn up according to current regulations, including new production sharing terms.
"Any contract will also have a term of 30 years," he said.
Concerning the progress of the negotiations, the head of Pertamina's negotiating team, Rizal Mallarangeng, said both companies were upbeat about finalizing a contract in the near future as they neared agreement on several problems that had stalled talks.
"We just need a few more days to match our terms and reach a final, win-win solution," he said, adding that wrapping up the contract was important for helping Indonesia increase its oil production and improve its overall investment climate.
The negotiation had previously been scheduled for conclusion on May 20.
Martiono said 11 terms remained to be negotiated, most importantly on the production revenue split, participating interests and work areas.
He said Pertamina would not rush to reach an agreement that in the end would hurt the country, nor would the country speed up talks just to finalize the contract in time for President Susilo Bambang Yudhoyono's official visit to the United States next week.
A senior official at the Ministry of Energy and Mineral Resources told Dow Jones newswire that Susilo would meet with officials of major U.S. oil and gas firms during his May 24 to May 27 visit, offering the development of 20 new oil and gas blocks and two natural gas pipeline projects estimated at between US$400 million and $600 million in value.
Indonesia has seen its average oil production decline by 5 percent per year, causing the country to miss its Organization of Petroleum Exporting Countries (OPEC) quota of 1.425 million barrels per day (bpd) over the last three years. Indonesia is now on the verge of becoming a net oil importer.
The Cepu block -- on the border between Central Java and East Java and estimated to have two billion barrels of potential oil reserves and 11 trillion cubic feet of potential gas reserves -- is expected to add about 18 percent to Indonesia's current oil output.