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.