BP Migas rejects Pertamina's plan to begin drilling works at Cepu block

The Upstream Oil and Gas Authority (BP Migas) will reject the state owned oil and gas company Pertamina's proposal to begin drilling activities at the disputed Cepu oil block in East Java in January, next year.

The head of BP Migas Kardaya Warnika said in Jakarta on Wednesday that the Plan of Development (PoD) for the Cepu oil block should come from both Pertamina and ExxonMobil Indonesia because the two companies have the equal rights to develop the oil block.

"If the PoD comes from Pertamina alone, we will reject the proposal," he was quoted as saying. Pertamina said earlier that it would go alone to operate the massive oil block if Exxon rejected its demand to take turns in acting as the operator of the oil block. Exxon insisted that it has the rights to become the sole operator until the end of the contract.

The government signed the new contract for the development of the Cepu oil block with its operators Pertamina and ExxonMobil Indonesia recently after prolonged negotiations.

Under the new agreement, Pertamina and ExxonMobil will have participating interest of 45 percent in the Cepu oil block, each. The other 10 percent will be allocated to the local government which oversees the territory where the oil block is located. Both oil giants however want to become the operator of the massive oil block.

ExxonMobil formerly operated the Cepu oil block under technical assistance contract with Pertamina. The contract should have ended in 2010 but the oil giant demanded the earlier extension of the contract for the certainty of its investment in the oil field for another 20 years. (godang)