Chief Economic Minister Budiono to tackle Cepu dispute

Chief Economic Minister Boediono will hold a limited cabinet meeting to find solution to end the prolonged dispute between ExxonMobil and state oil and gas firm Pertamina over the operation of the Cepu oil block in Bojonegoro regency, East Java, Investor Daily reported on Tuesday.

State Minister for State Companies Sugiharto said in Jakarta on Monday that he had asked his deputy Roes Aryawijaya, the chairman for the Cepu negotiation team, to report the case in details to him.

"The issue will be then taken to the limited cabinet meeting which will be led by Chief Economic Minister Budiono so that the government will have a clear picture on how to settle the problem," he said.

Sugiharto said that he hoped the solutions would be good for both Pertamina and Exxon so that the joint operation agreement between the two companies could be signed this month.

Pertamina had earlier said that the company refused to sign the joint operation agreement if ExxonMobil continued to insist to become the operator of the massive oil block.

Under the new contract 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.

Pertamina had proposed to Exxon to take turn on the operatorship for every five years but the proposal is opposed by Exxon, saying it has the rights to act as the sole operator until the end of the 30 year-contract.

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. (*)