Gov't says Cepu settlement nears

Exxon Mobil Corp. agreed to cut its share of revenue from Indonesia's largest untapped oilfield, ending a four-year dispute with the government that has jeopardized the OPEC nation's status as a net oil exporter, Bloomberg reported.

Exxon will get 6.75 percent of the revenue from the $2.6 billion Cepu oil project while oil remains above $45 a barrel, rising to as much as 13.5 percent should the price fall below $35, Rizal Mallarangeng, a spokesman for the negotiating parties, told reporters Wednesday.

Exxon, the world's biggest publicly traded oil company, had sought a 20 percent stake before developing the field.

"We have agreed on the major things, including the revenue split and compensation fee," M. Ichsan, a government negotiator, said in Jakarta.

Cepu is estimated to contain 600 million barrels of oil and would add about 18 percent to Indonesia's output at a time when global crude prices have risen to records. Indonesia's failure to resolve the dispute earlier had stalled oil and gas projects, contributing to a slowdown in investments in the industry.

"This is positive, it shows that the ship is heading towards the right direction," said Tony Regan, director of Tri- Zen, a Singapore-based energy consultant. "Indonesia has a lot of acreage coming up for bidding and this is a good sign for foreign investors."

Exxon Mobil's Indonesian spokeswoman Deva Rachman declined to comment on the terms of the settlement.

"We have a constructive engagement," she said.

Under the settlement, Indonesia's central government would give Exxon, PT Pertamina and the local government a so-called production sharing contract with as much as 30 percent of the field's revenue if oil prices drop below $35 a barrel and as little as 15 percent if prices rise above $45, Mallarangeng said.

The balance of the revenue would go the central government.

Exxon and state-owned Pertamina each gets 45 percent of the revenue from the production sharing contract and Bojonegoro regency government 10 percent.

Oil prices below $35 a barrel would secure Exxon 13.5 percent of total field revenue. Oil prices above $45 a barrel would give Exxon 6.75 percent of total revenue.

In 2001, parliament enacted a law to bring an end to the type of so-called technical assistance contract that gave Exxon a license until 2010 to develop Cepu, with 35 percent of any oil produced.

Under an earlier agreement with the government, Pertamina would get 40 percent of any oil produced after 2010. Exxon's request for a 20-year extension of its license and half of Pertamina's share, or 20 percent, was refused in 2003.

The companies later reached an initial agreement for the extension to be granted. In exchange, Exxon was to pay $85 million, finance 90 percent of the cost to develop the field during the first year, give up its right to two neighboring fields and include Pertamina in several overseas operations.

Pertamina's initial agreement with Exxon was retracted in August last year, when the government appointed new directors at the state oil company.(*)