Government hopes to end Cepu row

Rendi A. Witular, The Jakarta Post/Jakarta

The government hopes to soon resolve a serious contract row over the Cepu oil block in Central Java between state oil and gas firm PT Pertamina and U.S. oil giant ExxonMobil.

Coordinating Minister for the Economy Aburizal Bakrie said on Friday at the State Palace that there was "progress in the negotiations" with the government offering ExxonMobil less than a 15 percent stake in the contractor allocation split.

The government will have an 85 percent stake in developing the project, with the remaining 15 percent allocated for the field contractor, in this case Pertamina and ExxonMobil.

At present, ExxonMobil and Pertamina are still negotiating their split of the 15 percent allocation.

"We expect to wrap up the negotiation soon. The government remains firm on its stance to offer ExxonMobil a lesser share than the usual, that is, less than 15 percent," Aburizal said.

The minister made the remark after accompanying the government's negotiating team to report the progress on the dispute settlement to President Susilo Bambang Yudhoyono.

He said Susilo agreed that the negotiation should continue and that it should immediately produce results, since the country has a shortage in investment in the oil and gas sector.

"The President suggested that the team seek the best solution for the dispute," he added.

Meanwhile, the negotiating team head Martiono said one of the main stumbling blocks in the negotiation was the percentage share for ExxonMobil from the 15 percent allocation for the contractor.

"There are 11 items that have still not been agreed upon. However, the most daunting task of all is the split. If this is settled then the remaining items will be easier," he said.

Pertamina and House of Representatives Commission VII for energy and mining agreed on Wednesday to oppose any outcome resulting from the negotiation, pointing to the questionable establishment of the negotiating team.

A day later, Vice President Jusuf Kalla told legislators not to interfere in the government's domain, insisting that talks over the dispute would go on for the sake of the people's welfare.

The Cepu block -- which is located on the border of Central Java and East Java and owned by Pertamina but operated by ExxonMobil Indonesia under a technical assistance contract -- has vast oil reserves.

However, ExxonMobil has stalled the development of the Cepu block since 2001 to seek an extension to its contract which is set to expire in 2010, as well as a greater share in the block.

The block is estimated to have two billion barrels of potential oil reserves and 11 trillion cubic feet of potential gas reserves, which is expected to increase Indonesia's oil output by 18 percent. Output has been declining over the last five years.