ExxonMobil promises billions in benefits for Cepu
Endy M. Bayuni, The Jakarta Post, Jakarta
ExxonMobil Corp, which has been locked in negotiations with the Indonesian government to develop a huge oil field in East Java, says it plans to spend $2 billion on the project.
That money will include building infrastructure, creating jobs for the locals, and bringing in other social benefits like schools and medical clinics to the area.
The Texas-based oil giant says it could get the field in Cepu to start producing within three years after it gets the go ahead, and potentially reaches full capacity of up to 170,000 barrels per day during that time.
That, according to ExxonMobil President Rex Tillerson, would bolster Indonesia's crude oil production by about 20 percent from its present capacity.
Using the conservative government assumption of $35 a barrel for the oil price, on average, for 2005, Cepu could bring in $1.5 billion in extra revenue a year to Indonesia, he said.
"It will have a huge impact on the oil supply for Indonesia, but also for its oil export," Tillerson said in an interview with The Jakarta Post and Kompas on Monday.
In town for the major oil and gas conference this week, Tillerson used the opportunity to meet with Indonesian officials to discuss the fate of the Cepu field as well as ExxonMobil's activities in Indonesia.
ExxonMobil struck oil in Cepu in 2001 with reserves estimated at 600 million barrels, making it the largest oil discovery in Indonesia in the last three decades. However, the company has been seeking to extend its concession beyond the present 2010 before investing in and developing the field.
Indonesia, for its part, had demanded a greater share of the oil from Cepu. An initial agreement to jointly develop the field on a 50-50 basis with Pertamina had been signed, but the two sides are still in a dispute over the amount of money the state oil giant has to reimburse ExxonMobil. Pertamina is disputing Exxon's claims that it spent $450 million to discover the field.
Pressed for hard currency, pressure is mounting on Jakarta to compromise. Indonesia's oil production has been declining in the absence of new oil discoveries. It has also not been able to produce its 1.3 million OPEC production quota, and rising domestic fuel consumption has turned Indonesia into a net oil importer.
President Susilo Bambang Yudhoyono wants the dispute with ExxonMobil resolved as part of his government's strategy to improve Indonesia's reputation among foreign investors.
"We understand how important Cepu is to the country. It's important to us. We've risked a lot of money out there to find it," Tillerson said. "We want to move on with the development."
He was particularly encouraged with the new government, noticing that negotiations, which stalled under President Megawati Soekarnoputri, had resumed.
The choice for Indonesia, as one senior Cabinet member puts it, boils down to either having the field developed now and reaping the benefits, or letting Exxon's concession expire in 2010 and developing the field itself, gaining 10 or 20 percent more of the revenue some 10 years later.
ExxonMobil is already in an advance stage in its plan to develop the Cepu field, and that includes plans to build roads and other infrastructure, create jobs for the people in the region, and build social service facilities like schools and clinics.
Tillerson pointed out that ExxonMobil's experience in managing the Arun gas field in Aceh was proof that they could bring benefits to the people.
"In Aceh, we have treated over two million people at our clinic. That's an extraordinary figure," he said.
ExxonMobil has been operating in Indonesia since 1898 under different names like Esso and Mobil. Today, its activities are integrated under ExxonMobil Oil Indonesia Inc, which operates the Arun gas field and is also developing the huge gas field near the Natuna Islands in the South China Sea.
Tillerson praised the new government in Jakarta for recognizing the need to make the oil and gas sector more attractive to foreign oil companies, and to reduce the bureaucratic processes that have deterred investors in recent years.
"There may be some further improvement needed. There is a good dialog with the industry," he said.
Indonesia needed to make the process of awarding concessions more transparent as well as competitive, he said. "The rules can be what the rules are. As long as we know what they are, and that they are the same for everyone..."
Tillerson cited a recent survey -- which ranked Indonesia near the bottom in terms of attractiveness for oil investors -- as one reason for the government to review its oil policy and make the huge risk of exploring for oil in Indonesia more rewarding.
"The real fundamental issue is how the government wants to set the terms to provide the opportunity to share in the successes," he said. "The failures (of discovering oil) are ours, it doesn't cost the government anything."