Govt may cancel Exxon, Pertamina license in Cepu

Govt may cancel Exxon, Pertamina license in Cepu

Wahyudi Soeriaatmadja, Bloomberg/Jakarta

Indonesia may cancel the rights given to Exxon Mobil Corp and
state oil company PT Pertamina to develop the country's biggest
untapped oil field should the companies fail to resolve their
dispute by year-end.

Exxon wants to be the sole operator of Cepu field and that has
resulted in a deadlock because Pertamina had suggested that the
two companies jointly operate the area. Pertamina has said it
will ask Indonesian President Susilo Bambang Yudhoyono to resolve
the dispute.

"If the deadlock continues then we have to take it over from
both Pertamina and Exxon and give it to others," Aburizal Bakrie,
the country's top economics minister, told reporters in Jakarta
today. "We expect by the end of this year they would have
settled."

Pertamina is aiming for a decision by December so that Cepu
can start producing oil next year to bolster Indonesia's oil
exports. The four-year dispute over Cepu between Pertamina and
Exxon, the world's biggest publicly traded oil company, has led
to Indonesia becoming a net oil importer, widening its budget
deficit widening and weakening the domestic currency.

The country's decline in oil output averaged more than 5
percent annually over the past five years. Cepu, in central Java,
is estimated to contain 500 million barrels of oil and would add
about 18 percent to Indonesia's oil production.

The state oil and gas regulator BP Migas on Sept. 17 signed an
agreement with Pertamina and Exxon to give the two companies a
30-year license to develop the $2.6 billion Cepu oilfield project
in Java. The two companies can't start developing the field until
they reach an agreement on who the operator will be.

Exxon was the operator of Cepu under a previous plan known as
a technical assistance contract with Pertamina. The contract,
which was to have expired in 2010, was replaced by a new license
that was awarded by the government on Sept. 17.

Maman Budiman, a vice president at Exxon's Indonesian unit,
and Deva Rachman, a spokeswoman of the unit, couldn't be reached
for comment.