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.