Exxon, Pertamina close to reach deal on land compensation

U.S. oil giant ExxonMobil and state oil and gas firm PT Pertamina are close to reach an agreement on land compensation prices with the residents of Bojonegoro regency, Kontan reported on Monday.

The agreement will pave the way for the both firms to start early oil production from Cepu block by the end of 2008.

Bojonegoro Regent Mochammad Santoso said the residents had agreed to price their lands at Rp 50,000-60,000, down the previous prices of Rp 50,000-200,000 per square meter.

"The negotiation process is leading to a compromise," the regent said.

ExxonMobil Oil Indonesia's External Relation Vice President Maman Budiman said the price range of Rp 50,000-60,000 is acceptable for Exxon.

"We hope to reach an agreement soon," he said.

Earlier, Exxon and Pertamina, the co-operators of the block, delayed Cepu's first production by about nine months to October 2009 due to problems over land acquisition. Initially, they hoped to start oil production from the block in late 2008 or early 2009 at the rate of 10,000 barrels per day.

"It's hard to find rigs and to acquire lands," Pertamina's Deputy President Director Iin Arifin Takhyan told Reuters on the sidelines of a conference in Singapore in August 2007.

The Cepu block, located in the border areas of Central Java and East Java, has estimated oil reserves of about 600 million barrels spread over several wells, including Banyu Urip, the largest well with an estimated reserve of 350 million barrels. (*)