ExxonMobil's patience wearing thin on Cepu negotiation
Thursday, June 12 2003 - 12:24 AM WIB
An ExxonMobil top official made a complaint in a June 4 letter to President Megawati Soekarnoputri, saying there had been no real progress in the negotiations.
In the letter, a copy of which was obtained by Petromindo.Com, ExxonMobil said that Pertamina had suspended further negotiations to pursue a broad cooperation contract with upstream oil and gas authority BPMIGAS regarding all Pertamina?s areas of operations. Under the new oil and gas law Pertamina will loose its upstream privileges and will be treated as common production sharing contractor, which obliges Pertamina to renegotiate terms and conditions of its working areas.
ExxonMobil said that the suspension would result in "further significant" delays in the development of the Banyu Urip oilfield.
It added that the broad cooperation contract will compromise ExxonMobil's contractual rights and its ability to legally conduct exploration and production operations.
"The Cepu block should be separated from Pertamina's broader discussion with Migas (Directorate General of Oil and Gas of the Ministry of Energy and Mineral Resources) and BPMIGAS in order to successfully conclude an arrangement with ExxonMobil that recognizes and protect the rights of all parties. ExxonMobil remains willing to proceed with the major Banyu Urip oil field development as soon as Pertamina, BPMIGAS and the government of Indonesia sign an MoU defining key terms and conditions of the extended contract for Cepu block," said the letter.
There had actually been some progress in the negotiation over the Cepu block extension prior to the suspension measure with both Pertamina and ExxonMobil were reportedly to have agreed on a 50-50 joint venture as compensation for 20 years contract extension.
The main stumbling block for negotiation is the US$ 400 million cash bonus Pertamina asked for extending the block's contract. Thus far, ExxonMobil was reportedly willing to pay only US$ 45 million. If not extended, ExxonMobil's contract on Cepu would end in 2010.
Initially, ExxonMobil planned to start producing oil from Banyu Urip field this year, at around 150,000 barrels a day. But, the company later asked Pertamina to extend its contract, arguing that without contract extension it would not be able to recover its massive investment.
ExxonMobil had discovered recoverable oil reserves in excess of 250 million barrels and around 6 trillion cubic feet of natural gas in Cepu block. (godang)