Pertamina fights for control of Cepu

Leony Aurora, The Jakarta Post, Jakarta

State oil and gas firm PT Pertamina wants to replace ExxonMobil as the operator of the as yet untapped oil-rich Cepu block and is now requesting a bigger split of the output due to its exclusive right as a state company.

Pertamina's president director Widya Purnama said on Monday the company would hold 55 percent of voting rights, comprising 45 percent of its participating interest and 10 percent of shares given to local administrations.

"As Pertamina is the single largest (holder), we will run Cepu," he said.

"We are not considering a joint operatorship at present," said Widya. "We believe in the expertise of our experts."

He added that Pertamina also requested a contractor's split of 40 percent of oil produced in Cepu.

Exxon and a government-sponsored negotiating team recently agreed on deal that called for the stakeholders -- Pertamina, Exxon and local governments -- to get 15 percent of output and the government 85 percent if oil prices averaged over US$45 in a year.

If oil falls to below $35 it would be a 30-70 split.

"Referring to laws and regulations on Pertamina's exclusivity rights, we should apply a split of 60 percent (for the government) and 40 percent (for the company)," said Widya.

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 they expire.

Widya insisted, however, that the company's privileges were still intact, as Pertamina was wholly owned by the state.

"We have studied (the initial agreement with Exxon) as tasked by the general shareholders meeting," said Widya.

"We've handed the study results to the government. It is now up to (the government)."

If Pertamina's request is approved, it will get 18 percent of all oil produced by the block, while Exxon will take between 6.75 percent and 13.5 percent of all output and local administrations between 1.5 percent and 3 percent.

Indonesia and the U.S.-based oil giant ended a four-year dispute and signed a Memorandum of Understanding in June to develop the Cepu block, located on the border of East Java and Central Java.

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