Development of Cepu giant oilfield to commence by year-end: Pertamina

State oil and gas company Pertamina was optimistic it could complete joint venture agreement with US Oil giant ExxonMobil Corp. within the next few months and could start development of Cepu giant oilfield in Central/East Java by the end of the year, thus bring the field into production in 2005.

?Pertamina and ExxonMobil had principally agreed to operate the block on 50:50 basis and we are hoping that development of Cepu field could be resumed by the end of this year,? said Pertamina president Baihaki Hakim on Friday.

Baihaki said Pertamina?s main concern was to verify the amount of sunk cost ExxonMobil had spent on Cepu block.?Until the end of 2002 ExxonMobil claimed to have spend US$475 million. That would need to be clarified, because Pertamina will pay for half of the sunk cost, said Baihaki. Another issue, said Baihaki, was to verify the amount of US$1.72 billion ExxonMobil proposed as investment to develop the field.

ExxonMobil official was not available for comment.

Earlier, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that Pertamina would pay for its investment obligation for Cepu through loan and bond issuance.

Exxon Mobil acquired Cepu oil block from a company owned by former president Soeharto?s youngest son Hutomo Mandala Putra. Exxon Mobil last year announced the discovery of recoverable oil reserve of at least 250 million barrels in 2001, but some studies said the recoverable reserve could be as big as 500 million barrels plus 6 trillion cubic feet of gas.

Under the technical assistance contract, Exxon Mobil is allowed to operate Cepu oil block, which is owned by Pertamina. The contract of Cepu block will end in 2010. Exxon Mobil had intended to extend the block?s contract, but Pertamina asked for huge sum of cash compensation and 50 percent equity participation in return of contract extension, which Exxon Mobil had repeatedly rejected.

The field was originally planned to be developed to flow oil of around 150,000 barrels per day starting 2003. But prolonged negotiation between Pertamina and Exxon Mobil put the development on halt. (arry)