Correction: ExxonMobil may possibly start production in Cepu block in 2006: Pertamina official

ExxonMobil will be able to start production activities at the Cepu oil block in 2006, if the government agrees to extend its current contract in operating the oil block this year, Neraca daily reported on Thursday.

"If the government agrees to renew the contract, Exxon will have no difficulties to begin the production activities in 2006," said Bambang Nugroho, the director of Pertamina's upstream operation.

Bambang said negotiations between ExxonMobil and the government over this issue had been completed. "It is now up to Pertamina's commissioners to decide whether or not ExxonMobil's contract (extension) will be signed.

The technical assistance contract held by ExxonMobil to operate the Cepu oil field will expire in 2010. The oil giant has requested for an early extension of the contract to to obtain certainty for another 20 years if the company is to make fresh investment in the Cepu block.

Pertamina, however, demanded ExxonMobil to pay US$400 million as compensation for the early extension of the contract. Pertamina also demanded an increase in its interest in the Cepu oil field to 17 percent from the current 10 percent as part of the compensation. (*)