Pertamina may take Cepu imbroglio to President
Leony Aurora, The Jakarta Post/Jakarta
It seems that it is time once again for President Susilo Bambang Yudhoyono to step in to sort out the muddle between state oil and gas firm PT Pertamina and U.S. energy giant ExxonMobil over the Cepu block.
Pertamina president director Widya Purnama said on Friday that the company would take the question of operatorship of the oil- rich block to the President in an attempt to unblock the negotiations with its partner ExxonMobil.
"The President was the one who instructed us to form a joint operatorship," said Widya. "ExxonMobil does not want to. This is not right," he added.
"If this deadlock continues, I will report the matter to the President," said Widya.
Talks between the two parties have stumbled into deadlock because although Pertamina has agreed to joint operatorship, it wishes to have principal control for the first five years of development. ExxonMobil would then take over for the following five years, with the companies subsequently alternating control until the contract expires in 2035.
ExxonMobil spokesman Maman Budiman said that the Texas-based firm was determined to stick with the memorandum of understanding (MoU) signed in June with a government-sponsored negotiating team, which ended a four year dispute over the Cepu block.
"The MoU stipulates that Exxon will be the operator," said Maman.
"We are still in discussions on how to operate the block. Both parties will require a lot of time to understand each other's views," he added.
Pertamina's dispute with Exxon was resolved only after the President ordered the setting up of a negotiating team, which included more experts from relevant ministries than members of Pertamina's board of directors. The President has on several occasions stated the importance of the Cepu block to the effort to significantly boost the country's dwindling oil output, which is declining by an average of 5 percent annually.
The block, located on the border between Central Java and East Java, is expected to contribute 170,000 barrels of crude oil per day during its peak production -- equivalent to about 18 percent of Indonesia's current output.
ExxonMobil and Pertamina signed a production sharing contract with the government on Sept. 17 to develop the US$2.6 billion Cepu block, the country's biggest untapped oil deposit.
The contractors -- comprising Pertamina and ExxonMobil with 45 percent each, and local administrations with the other 10 percent -- will get either 15 percent or 30 percent of output depending on whether oil prices average over $45 in one year or below $35 in one year respectively.