House 'won't intervene' in Cepu oil dispute

Leony Aurora, The Jakarta Post, Jakarta

The House of Representatives has softened its stance on the ongoing negotiations between state oil and gas firm Pertamina and U.S. company ExxonMobil over the Cepu oil block in Central Java, saying that it wishes only to meet with the Indonesian negotiating team to ensure a speedy resolution.

Chairman of the House's Commission VII for energy and mineral resources Agusman Effendi said on Sunday the House had no intention of getting involved in the negotiations.

"We want to know who the team represents. If it is a team from Pertamina, in which there are also representatives from (the office of) the State Minister for State Enterprises, it's OK," he said.

Agusman said the House was scheduled to meet the negotiation team to inquire on its establishment and composition, as well as to check up on the progress of the negotiations.

The Cepu negotiating team comprises of four officials from Pertamina, three officials representing the Office of the State Minister for State Enterprises, the finance ministry and the office of the Coordinating Minister for the Economy, and a political analyst.

The continuing discussions between the team and Exxon on the extension of the latter's contract to operate Cepu oil block on the border of East Java and Central Java heated up recently when the House said it would oppose any outcome from the negotiations.

The legislators argued their opposition was sparked by the "questionable establishment of the negotiating team". Vice President Jusuf Kalla responded by saying that "the process is part of the government's domain, and legislators should not interfere".

Agusman said the House wanted to ensure the deal benefited all parties.

"What we want is to have the area producing as soon as possible to boost our oil output," he said.

The government has pinned high hopes on the Cepu block, which is estimated to have two billion barrels of potential oil reserves and 11 trillion cubic feet of potential gas reserves, to boost the country's steadily declining oil output.

ExxonMobil, which operated the block under a technical assistance contract with Pertamina, has said that Cepu could produce 170,000 barrels per day (bpd).

However, ExxonMobil has stalled the development of the block for the last four years to seek an extension to its contract, set to expire in 2010, as well as a greater share in the block.

The government is offering the company less than a 15 percent stake in the contractor-allocation split in exchange for the contract extension. ExxonMobil and Pertamina are still negotiating their split of the 15 percent allocation.