Pertamina says 'no' to ExxonMobil

Pertamina says 'no' to ExxonMobil

The Jakarta Post, Jakarta

State oil and gas company PT Pertamina said on Wednesday it would not extend its contract with U.S.-based ExxonMobil Oil Indonesia Inc. to operate the Cepu oil and gas block, which is believed to contain huge oil and gas reserves.

Pertamina's president Widya Purnama said it was more profitable for Pertamina to operate the block itself rather than with a partner.

"We will send a letter to ExxonMobil on the plan later this week," Widya said in a hearing with House of Representatives Commission VIII on energy, mining and environmental affairs.

Widya did not explain the reason for the decision.

The decision is seen as a setback in the lengthy negotiation between the two companies on the future of Cepu block which has proven oil reserves of 600 million barrels and trillions of cubic feet of natural gas.

The previous management under Ariffi Nawawi worked hard to clinch a deal with the American firm which culminated in the signing of an initial agreement in March. Under the agreement, the government will receive 60 percent of the block's oil and gas production and the remainder will go to Pertamina and ExxonMobil.

ExxonMobil declined to comment on Pertamina's plan.

"We have yet to receive official notification from Pertamina. So, we can't give any comment," Maman Budiman, Vice President of Public Affairs at ExxonMobil Oil Indonesia Inc. told The Jakarta Post.

The Cepu block, located between Central and East Java, is owned by Pertamina. It handed the block over to PT Humpuss Patragas under a technical assistance contract (TAC) in the early 1990s. The firm was controlled by Hutomo "Tommy" Mandala Putra, the youngest son of former president Soeharto.

Under the TAC, Humpus was obliged to give Pertamina a portion of the block's output equal in volume to Pertamina's last production at the block. At the time of the handover to Humpuss, the block only produced a few thousands of barrels of oil per day.

In 1999, Humpuss sold its entire stake in the block to ExxonMobil Cepu.

Upon finding huge oil and gas reserves, ExxonMobil asked for an extension of the TAC which is due in 2010 until 2030.

Pertamina initially wanted to have an equal stake in the block plus hundreds of millions of dollars in compensation.