"Cepu deal could become model"

Indonesian economic czar Aburizal Bakrie said on Thursday a tentative deal with Exxon Mobil Corp for the Cepu oil block could become a model for cooperation between state oil company Pertamina and other oil firms.

Indonesia, which has suffered from declining oil production and needs new investment in the oil and gas sector, says it and Exxon have agreed on key issues such as the production split and participating interests in Cepu.

"The deal with Exxon is very good. It is a breakthrough. If other firms want the same terms as Pertamina with Cepu then I will very much welcome it," chief economic minister Aburizal Bakrie told reporters.

"If the price is high the contractor get 6.75 percent productioni split and if the price low 13.5 percent," he said as quoted by Reuters.

In a statement late on Tuesday, Exxon said its Indonesian subsidiaries have signed a memorandum of understanding with Pertamina and the Indonesian government.

Indonesia would impose a flexible split based on the oil price. The split is 85 percent for the government and 15 percent for the contractors when the oil price above $45 per barrel.

The split will be 80:20 in favour of government when the price is $40-$45 and 75:25 on a $35-$40 per barrel price.

The last split is 70:30 if the oil price is below $35.

Indonesia has said Exxon and Pertamina agreed to a 45 percent stake each in Cepu and 10 percent for the regional government where the block is located.

Martiono Hadianto, Indonesian chief negotiator, said on Thursday the government has ordered Pertamina to take further steps so the final deal with Exxon Mobil could be signed in September.

He said production from Cepu could begin by early 2008 and that the field needed investment of about $2 billion.

The field isn estimated to hold more than 500 milion barrels of oil, which could produce as much as a 180,000 barrels per day boost for Indonesia, equivalent to about 19 percent of the country's current output.(*)