Govt opposes Pertamina's requests over Cepu

Govt opposes Pertamina's requests over Cepu

The Jakarta Post, Jakarta

State oil and gas company PT Pertamina's requests to replace
ExxonMobil as the operator of the as-yet untapped oil-rich Cepu
block, and for a bigger split of the output has met strong
opposition from the government -- the company's sole shareholder.

Spokesman for the government's negotiating team on Cepu, Rizal
Mallarangeng, said on Tuesday the company should respect the
sanctity of the memorandum of understanding (MOU) signed between
Exxon and the negotiating team in June.

"Besides, the decision (in the MOU) was consulted in the
recent shareholders meeting and that should be respected by the
directors."

The firm's president director Widya Purnama said on Monday
that the company would hold 55 percent of the voting rights --
comprising 45 percent of its participating interest and 10
percent of the shares given to local administrations -- due to
its exclusive right as a state company.

Widya also said Pertamina requested a contractor's split of 40
percent of oil produced in Cepu.

Under the signed MOU, stakeholders -- Pertamina, Exxon and
local regency administrations -- will get 15 percent of all
output and the government 85 percent if oil prices averaged over
US$45 in a year.

If the price of oil falls below $35 it would be a 30-70 split.

Law No. 8/1971 on the state oil and gas company stipulates
that Pertamina and the government would comply with such a split.

The previous law, however, became obsolete with the enactment
of Law No. 22/2001 on oil and gas, which stipulates that
Pertamina's contracts will maintain the terms applied until such
time as they expire.

The MOU to develop the Cepu block, located on the border of
East Java and Central Java, was signed on June 25 and ended a
four-year dispute between Pertamina, which was represented by the
government team throughout the negotiation, and the U.S.-based
oil giant.

The production sharing contract to develop the block will be
signed by the government and a joint venture composed of
subsidiaries of ExxonMobil and Pertamina, later to be called
Pertamina Cepu.

Cepu is expected to produce 170,000 barrels of crude oil per
day when it reaches peak production, about 18 percent of
Indonesia's current output.