Kalla warns lawmakers off Cepu

Kalla warns lawmakers off Cepu

Rendi A. Witular, The Jakarta Post, Jakarta

Lawmakers' opposition to the ongoing negotiations to resolve a
serious contract dispute over the Cepu oil block between state
oil and gas firm Pertamina and U.S. company ExxonMobil has irked
Vice President Jusuf Kalla.

Kalla has responded by telling legislators "not to interfere
in the government's domain".

"There is no way that a negotiation process by the government
with another party can be conducted jointly with legislators.
Such a process is part of the government's domain, and
legislators should not interfere," he said on Thursday.

Kalla was not at all pleased with the decision made during
Wednesday's hearing between the House of Representatives'
Commission VII for energy and mining and Pertamina, wherein they
all agreed to oppose any outcome resulting from the negotiations.

The legislators argued that their opposition was sparked by
the "questionable establishment of the negotiating team", in
which the members were appointed without an official government
letter.

They also questioned Pertamina about the negotiating team as
it was not clear whom they were representing.

The commission also grumbled that the negotiations should be
entirely handled by Pertamina executives, since it was a
business-to-business dispute instead of a government-to-business
problems.

Despite the rejection, Kalla insisted that the government
would go ahead with the ongoing process for the sake of the
people's welfare since the Cepu block -- which is located on the
border of Central Java and East Java and owned by Pertamina but
operated by ExxonMobil Indonesia under a technical assistance
contract set to expire in 2010 -- has a great amount of oil
reserves.

The Cepu block is estimated to have two billion barrels of
potential oil reserves and 11 trillion cubic feet of potential
gas reserves, which is expected to increase Indonesia's oil
output by 18 percent. Output has been declining over the last
five years.

"If the government wants to create state losses for personal
gain, we could have made it last year and bowed to (ExxonMobil's)
demands," Kalla said, referring to the extension of the contract.

President Susilo Bambang Yudhoyono asked both companies to
reach an agreement by May 20 to end the dispute that has stalled
the development of the Cepu block since 2001.

Pertamina agreed to extend a contract only for the Banyu Urip
field, the largest in the Cepu area, and demanded a 70 percent
participating interest in the field, President Director Widya
Purnama said on Wednesday, Bloomberg reported. The firm also
wants Exxon to pay all of the $1.6 billion needed to develop the
field in the first three years.

Members of the Cepu negotiating team

* Martiono, Pertamina president Commissioner,

* Muhammad Abduh, Pertamina commissioner

* Umar Said, Pertamina commissioner

* Mustiko Saleh, Pertamina vice president director

* Sahala Lumban Gaol, Ministry of Finance's director for oil and
gas revenue.

* Lin Che Wei, staff expert at the office of the State Minister
for State Enterprises

* Mohammad Ikhsan, staff expert from the office of the
Coordinating Minister for the Economy

* Rizal Mallarangeng, political analyst