Pertamina proposes JV for Cepu block

Pertamina proposes JV for Cepu block

Moch. N. Kurniawan, The Jakarta Post, Jakarta

State-owned oil and gas firm Pertamina has proposed to Mobil Cepu
Ltd., an affiliate of ExxonMobil Corp., to set up a joint venture
(JV) which will continue the operation of the Cepu oil block once
the latter's contract expires in 2010.

Pertamina's upstream director Iin Arifin Takhyan said that
under the proposal, the joint venture will retain the current
technical assistance contract (TAC) in operating the oil-rich
block.

"We are offering Mobil Cepu to set up a joint venture in which
we (Pertamina) will have a 50 percent stake," he told The Jakarta
Post recently.

He added that the negotiation with Mobil Cepu was expected to
be wrapped up by June.

ExxonMobil Oil Indonesia spokeswoman Julia Tumengkol declined
to comment.

The Cepu oil block is located in Central Java and East Java.

Last year, Mobil Cepu discovered a recoverable reserve in
excess of 250 million barrels of oil.

It is expected to produce more than 100,000 barrels oil per
day from the block starting in 2003.

The Cepu block was acquired from Pertamina by PT Humpuss
Patragas, a company owned by Hutomo Mandala Putra, the youngest
son of former president Soeharto, in 1999.

Humpuss then sold 100 percent interest in the block to Mobil
Cepu in 2000.

Prior to the acquisition by Humpuss, Pertamina could only
produce a very small volume of oil from the Cepu block, which
some officials considered at the time as a marginal field.

But Pertamina now claimed that Humpuss made a hostile takeover
at the time.

TAC is an agreement between Pertamina and an oil and gas
investor, allowing the latter to work in Pertamina's working area
to rehabilitate the existing wells or fields.

Under the TAC contract, Mobil Cepu is only obliged to provide
Pertamina with part of the Cepu block output at an amount equal
to the volume last produced by the state-owned company.

With the huge oil find in the Cepu block, Mobil Cepu wants to
extend the existing TAC contract, but Pertamina clearly wants to
obtain a greater share in the block by offering a joint venture
mechanism.