Audit agency accuses ExxonMobil of cost mark-up practice

The government audit agency (BPKP) has found indications that ExxonMobil has marked up the cost of its operational activities at the Cepu oil field in Central Java, Bisnis Indonesia reported on Tuesday.

Pertamina president director Baihaki Hakim said that a team of BPKP and of Pertamina were recently dispatched to the United States to evaluate ExxonMobil?s spending in the oil field as part of efforts to further study the case.

The American oil company reported a total past cost of about US$459 million, including the spending for the acquisition of the Cepu oil block from PT Humpuss Patra Gas, Baihaki said, adding that the figure reported by the company was far higher than those calculated by BPKP.

Based on the valuation of the audit agency, ExxonMobil?s past cost totaled only US$142 million including the 2002 spending of about US$75.46 million, he said.

Baihaki said that BPKP also found alleged mark-up practices in the exploration activities. The drilling cost for the Jambaran I well, for example, reached US$834 per feet, much higher than the cost in other wells. For example, the drilling cost of Sukowati I and Mudi I oil wells operated by Devon Energy reached only US$486 per feet and US$344 per feet, respectively. (*)