Susilo to summon governors on Cepu block

Susilo to summon governors on Cepu block

Suherdjoko, The Jakarta Post, Cepu, Central Java

President Susilo Bambang Yudhoyono is scheduled to summon Central
Java Governor Mardiyanto and East Java Governor Imam Utomo to his
office on Tuesday to discuss the ongoing deadlock over the Cepu
oil block's profit splits.

Central Java Mining and Energy Agency's official Teguh Dwi
Paryono said on Saturday that Tuesday's discussion was expected
to conclude with an agreement.

"There are seven wells ready for production that were drilled
by PT Humpuss in 2000. But there has been no production since
2002," he said when visiting the block, located on both sides of
the border of the two provinces.

Part of the Cepu block in Blora regency, Central Java, has
about 895 million barrels of oil reserves while another part in
Bojonegoro regency, East Java, contains over 1.5 billion barrels
of reserves.

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

The dispute between the two provinces has added another
problem to the ongoing negotiations between state oil and gas
firm PT Pertamina and U.S. oil giant ExxonMobil over who will
manage and profit from the block.

Under the signed Memorandum of Understanding (MOU) in June,
stakeholders -- Pertamina, Exxon and regency administrations --
will get 15 percent of all output and the government 85 percent
if oil prices averaged over US$45 in a year. If the price of oil
falls below $35 it would be a 30-70 split.

Pertamina said it wants to run the operation for the first
five years. But ExxonMobil remains firm that according to their
contract, the Texas-based firm has been appointed as the operator
of the block.

Bojonegoro Regent Mochamad Santoso demanded in August that the
government not split the revenues with other regencies, as most
of Cepu lies in his area.

Teguh said Bojonegoro demanded 78 percent of the revenue
granted for local administrations with the rest going to Central
Java.