Govt steps in to settle Cepu block row, again

Govt steps in to settle Cepu block row, again

Rendi A. Witular, The Jakarta Post, Jakarta

The government has decided to once again try to help unlock the
stalled negotiations between U.S. oil giant ExxonMobil Corp. and
state-owned oil and gas firm PT Pertamina over who will be in
charge of managing the oil-rich Cepu block.

A special interministerial negotiating team, which in June
managed to get both firms and the government to seal a deal for
developing the block ending a four-year dispute, has been
reactivated to settle the row, said State Minister of State
Enterprises Sugiharto on Wednesday.

"The previous interministerial team is now tasked with helping
Pertamina and ExxonMobil to settle the operatorship issue. I may
say this will no longer be a business-to-business settlement,"
Sugiharto said.

Sugiharto said the composition of the team would be the same,
except for its chairman Martiono -- Pertamina's chief
commissioner -- who has been replaced by Roes Aryawidjaja, a
Pertamina commissioner and deputy state minister of state
enterprises.

Other members of the team include Pertamina commissioners
Muhammad Abduh and Umar Said, Pertamina president director Widya
Purnama, Pertamina vice president director Mustiko Saleh, and the
Ministry of Finance's director for oil and gas revenue, Sahala
Lumban Gaol.

Also on the team are Lin Che Wei, an expert advisor at the
Office of the State Minister for State Enterprises, Mohammad
Ikhsan, an expert advisor at the Office of the Coordinating
Minister for the Economy, and Rizal Mallarangeng, a political
analyst.

Sugiharto said the team had recently come up with a possible
solution to the deadlock involving Pertamina and ExxonMobil
setting up a joint-venture company to specifically operate the
block based on a 50/50 arrangement.

"There has been progress made by the team. We have come up
with another option aside from the previous one involving
alternating turns as operator every five years ... I am
optimistic the issue can be settled soon," he said.

The government-sanctioned team managed to get ExxonMobil and
Pertamina to sign a production sharing contract with the
government on Sept. 17 to develop the US$2.6 billion Cepu block,
which contains estimated reserves of 500 million barrels of crude
oil.

At its peak, the block is expected to produce up to 170,000
barrels of oil per day (bpd) -- roughly 17 percent of the
country's current annual oil output.

After the deal, optimisms was high that exploration of the
block would begin quickly without the need for government
assistance in the negotiations for a joint operating agreement
(JOA) between Pertamina and Exxonmobil.

However, talks over the JOA have become deadlock with each
side holding out for principal control of the block.

Under the memorandum of understanding (MOU) signed in June by
the two companies and the government-sanctioned team, ExxonMobil
would have the right to become the sole operator of the block for
the entire duration of the contract.