ExxonMobil expected to submit new proposal over Cepu Block next week

U.S. oil producer ExxonMobil will submit a new proposal next week to ask state oil and gas company Pertamina to extend its technical assistance contract (TAC) to operate and manage the Cepu Block in Central Java, the president director of state oil and gas company Pertamina told Petromindo.Com. on Tuesday.

?We are awaiting ExxonMobil to submit next week a new proposal on the Cepu Block,? Baihaki said early this week.

ExxonMobil, through its unit Mobil Cepu Ltd, holds 100 percent interest in the Cepu Block.

ExxonMobil?s current contract with Pertamina for the Cepu block ends in 2010. Earlier reports said the company wanted 20-year contract extension.

Baihaki said on Tuesday the proposal to be submitted by ExxonMobil next week would contain matters like terms and parameters for the new contract including specific things such as working equity division of the Cepu Block among the government, Pertamina and ExxonMobil. Sunk costs would also be part of the proposal, Baihaki said.

Pertamina had rejected ExxonMobil?s proposal that Pertamina repay the amounts it had used to buy the Cepu Block from Humpuss Group, and that the costs be incorporated in the new contract requested by ExxonMobil.

No information was available concerning the contents of the previous proposal handed over by Exxon to Pertamina.

Pertamina, whose status has been changed into an ordinary limited liability under existing oil and gas law, had demanded that it be given 50 percent interest in the Cepu Block if ExxonMobil wants TAC extension.

Under TAC, Pertamina is responsible for the management of the Cepu Block while ExxonMobil, through Mobil Cepu Ltd, is obliged to cover all the operating costs. The also stipulates that the government receive 65 percent of the oil production, while Pertamina and ExxonMobil together get the remaining 35 percent.

ExxonMobil disclosed in April 2001 the oil reserve in Cepu was estimated at some 250 million barrels. However, state oil and gas research center Lemigas recently put the reserve at 450 million barrels, and a report by an international oil magazine, Upstream, estimated the reserve at a staggering 2 billion barrels.

Meanwhile, the secretary of the government Board of Commissioners for Pertamina (DKKP), Maizar Rahman, said it held the results of Lemigas study.

There have been mounting pressures from different camps that the government reject ExxonMobil?s request for Cepu contract extension, thus letting Indonesian investors to operate the block so as to enable the Indonesian people benefit more from it. (godang)