Pertamina, Exxon reach initial deal on Cepu
Fitri Wulandari, The Jakarta Post , Jakarta
State oil company Pertamina has reached a preliminary agreement with U.S.-based ExxonMobil Oil on the extension of a contract to operate the Cepu oil and gas block, a Pertamina official said on Thursday.
Pertamina Upstream Director Bambang Nugroho said Pertamina and ExxonMobil Oil Indonesia had negotiated that they would work under a Special Working Contract.
Under the scheme, the government would receive 60 percent and the remainder would go to Pertamina, which would split its share with ExxonMobil.
However, Bambang declined to give details on ExxonMobil's split.
"We have completed points in the head of agreement (HoA), which is awaiting approval from the (Pertamina) board of commissioners and the shareholders," Bambang told reporters after a hearing with House of Representatives Commission VIII that oversees energy affairs.
Bambang said the board of commissioner and shareholders would give its approval on the split as well as the extension of ExxonMobil's technical assistance contract (TAC) on the block, which expires in 2010.
ExxonMobil declined to comment on the matter.
"ExxonMobil hopes to have an equitable agreement in the near future, but we don't have an announcement at the moment," ExxonMobil spokeswoman Deva Rachman told The Jakarta Post.
Pertamina and ExxonMobil have been locked in a prolonged dispute over the operation of the Cepu block located in the border area between Central and East Java, which is estimated to have two billion barrels of potential oil reserves of and 11 trillion cubic feet (TCF) of potential gas reserves.
In the early 1990s, Pertamina handed the block over to PT Humpuss Patragas under a TAC. Humpuss is owned by Hutomo "Tommy" Mandala Putra, the youngest son of former president Soeharto.
In 1999, Humpuss sold its entire stake in the block to ExxonMobil Cepu. ExxonMobil asked for an extension of the current TAC until 2030 after finding huge oil and gas reserves in the area.
Pertamina has opposed the demand.
Under the current TAC, ExxonMobil is only obliged to provide Pertamina with a Cepu block output equal in volume to that last produced by the state company. At the time of the handover to Humpuss, the block only produced a few thousands of barrels of oil per day.
Minister of Energy and Mineral Resources Purnomo Yusgiantoro said he had received a report on the completion of the negotiation and the split production scheme for the Cepu block.
However, he said the ministry was still studying the report.
"The split should be profitable for the state," Purnomo said.
While declining to give details on the contract, Bambang said the agreement would provide Pertamina returns of up to 44 percent of the net operation value.
As a partner to the scheme, Pertamina must share the investment costs ExxonMobil has already put in the block. ExxonMobil claimed to have spent US$400 million, but Pertamina doubted the figure.
Bambang said an audit was in progress to ascertain the amount of investment.