ExxonMobil not allowed to sign Cepu extension contract: Official

ExxonMobil’s proposal to operate the Cepu oil and gas block for another 20 years after the existing contract ends in 2010 has received an approval from the commissioners of Pertamina, the owner of the oil and gas block, Bisnis Indonesia reported on Monday.

“All the proposal made by Exxon has been approved except the one related to its demand to become one of the signatories of the contract,” Roes Aryawijaya, the deputy of the state minister for the supervision of state enterprises was quoted as saying.

Pertamina as the sole owner of the Cepu oil block is the only company that has the rights to sign the extension of the oil block contract with BP Migas, the government’s agency in charge of the supervision of the country’s oil and gas exploration and production.

“The ball is now at the hands of ExxonMobil and it is up to the company whether or not it will accept the deal,” he said. “For Pertamina, it is not a problem at all whether or not ExxonMobil accept the deal. The company can operate it itself or hands it over to another contractor when the existing contract ends in 2010,” he said.

The contract held by ExxonMobil to operate the Cepu oil field will terminate in 2010. But the oil giant demanded the earlier extension of the contract for the certainty of its investment in the oil field for another 20 years.

The oil field was formerly operated by former president Soeharto’s youngest son Hutomo Mandala Putra alias Tommy under a technical assistance cooperation agreement with Pertamina. Humpuss, however, sold its 49 percent interest in the oil block to Ampolex Ltd in 1997 and the other 51 percent to ExxonMobil’s subsidiary Mobil Cepu Ltd in 2000 following the fall of the former authoritarian leader after more than 30 years in power. Ampolex later sold its ownership to Mobil Cepu making the latter as the sole owner of the oil block.

Pertamina’s president Ariffi Nawawi had earlier said tat the state owned oil and gas company has in principle reached an agreement with ExxonMobil to form a joint venture to the develop the oil and gas block situated in the border areas of Central Java and East Java, which is believed to contain more than a half billion barrels of crude oil and trillions of cubic feet of natural gas. (*)