Pertamina units formed to oversee Cepu deal

Leony Aurora, The Jakarta Post/Jakarta

Paving the way for the signing of a deal on the Cepu oil block, state oil and gas firm PT Pertamina has formed two units to manage the block with U.S. energy giant ExxonMobil and to handle Pertamina's upstream activities at the block.

A special subsidiary called PT Pertamina Cepu, which will report to Pertamina EP, will be tasked with managing the block.

The two units were officially established last week, company spokesman Mochamad Harun said in an e-mailed statement on Friday.

Pertamina Cepu, together with Exxon's local subsidiary, are scheduled to sign a contract to develop the block with the government.

Pertamina vice president Mustiko Saleh declined to say when the signing would take place.

"It is not definite yet, but maybe tomorrow (Saturday)," he said.

State Secretary Yusril Ihza Mahendra said on Wednesday the government expected to sign a working contract to develop Cepu this week, adding that "all necessary legal documents have been completed".

The deadline for signing the contract, which was set when a government-sponsored negotiating team and a team from Exxon signed a preliminary agreement in July, is Sept. 23.

Pertamina and ExxonMobil, however, are still discussing the terms on their joint operating agreement (JOA).

Mustiko said the JOA did not need to be completed before the contract with the government was signed. Asked if this could cause problems later on, if the two parties disagreed on the terms of operation after the contract was signed, he said: "Both sides have to agree."

Pertamina, witnessed by President Susilo Bambang Yudhoyono, signed an agreement on Sept. 10 agreeing to a participating interest of 50 percent in the Cepu block, equal to Exxon. Both Pertamina and Exxon will then allocate 5 percent each to the relevant local administrations.

The agreement signals a softening of the stance of Pertamina's management on the issue of Cepu. Pertamina president director Widya Purnama had previously insisted that the block was owned by Pertamina, which would give Exxon a 45 percent participating interest.

According to Widya, Pertamina would then give local administrations a 10 percent interest in the block but retain the voting rights, giving it the upper hand in any decisions made about the block.

Also, Pertamina EP plans to sign production sharing contracts with the government for work areas under its management -- all of Pertamina's blocks except for Cepu and Randugunting -- on Saturday, Harun said.

Pertamina EP will also act as a subholding for other upstream activities such as gas, geothermal and drilling services, he said.

With the enactment of Law No. 22/2001 on oil and gas, Pertamina's status was downgraded to being just a player in the sector. Regulatory and supervisory functions are now held by the Oil and Gas Upstream Regulatory Agency (BP Migas).

The law requires Pertamina to sign production sharing contracts with the government, represented by BP Migas, for its existing work areas.

Meanwhile, Widya Purnama announced the boards of directors and boards of commissioners for Pertamina EP and Pertamina Cepu on Friday.

Kun Kurnely will head Pertamina EP, with Pertamina vice president Mustiko Saleh serving as president commissioner. Pertamina Cepu is led by Hestu Bagiyo, with Widodo Sutoyo as president commissioner.