ExxonMobil agrees to talk with govt on Natuna block

U.S. oil giant ExxonMobil Corp. agrees to talk with the Indonesian government about its contract on the Natuna D-Alpha gas block in South China Sea, as the latter reiterated on Thursday that the contract is no longer valid.

While insisting that the firm?s production sharing contract on the block was still valid, Deva Rachman, ExxonMobil Oil Indonesia Inc. (EMOI) communications manager Deva Rachman said Exxon had agreed to hold discussion with the government on the matter.

"ExxonMobil has agreed to enter mutually beneficial discussions (and) we expect the discussion to occur over the next several months," Deva said in a statement.

"We will continue to progress our technical and marketing activities (for Natuna) during this time."

Earlier on Thursday, Vice President Yusuf Kalla reiterated that that Exxon?s contract had ?automatically terminated? due to a lack of activity on the block over the past 20 years.

"For 20 years, there hasn't been any very big action" by Exxon on Natuna, Kalla was quoted by Dow Jones Newswires as saying during a question and answer session on the second day of a three-day infrastructure development conference in Jakarta.

Minister of Energy and Mineral Resource Purnomo Yusgiantoro told reporters that any decision to reopen Natuna contract negotiations with Exxon would hinge on agreement by the cabinet of President Susilo Bambang Yudhoyono.

The government's other options for Natuna's development include re-tendering the production sharing contract for a new round of bids, or handing over the block to state-owned Pertamina, Purnomo was quoted by Dow Jones as saying on the sidelines of the infrastructure investment conference.

Earlier, Exxon Mobil insisted that it had the contractual right to continue development of the Natuna block, which is estimated to hold 46 trillion cubic feet of natural gas resereves, until 2008 or 2009. EMOI.'s President and General Manager Peter J. Coleman has said the company was proceeding with a "four-year plan" to deliver natural gas from the Natuna D-Alpha block to foreign buyers by 2014. The Natuna gas is said to have high hydrocarbon content, which makes it very expensive to produce the gas.

He made the statement following announcement by both Purnomo and the chairman of the official upstream oil and gas regulator BP Migas, Kardaya Warnika, that the Exxon Mobil contractual right to develop Natuna was no longer valid.(Denny)