Government signals to extend Cepu oilfield contract

The government has indicated that it might approve the proposal of ExxonMobil Oil Indonesia to extend the contract of the Cepu oil field in Central Java, a senior official said as reported by Bisnis Indonesia on Saturday.

"There is an indication that the government will approve the extension of ExxonMobil Oil?s contract over the Cepu oil field," Secretary of the Board of Commissioners of Pertamina, Meizar Rahman said in Jakarta on Friday.

He said that the government would likely accept two of the five cooperation schemes being proposed for the operation of the Cepu oil field. The first option is to continue with technical assistance contract until 2010 and then proceed with joint operation contract between ExxonMobil and Pertamina for the next 20 year. The second option is to start immediately with joint operation contract.

"The government, Pertamina and ExxonMobil are still negotiating and calculating the amount of oil production share each party will receive from the Cepu oil field," he said.

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

The oil field was formerly owned by former president Soeharto?s youngest son Hutomo Mandala Putra alias Tommy. Humpuss sold 49 percent ownership in the oil block to Ampolex Ltd in 1997 and the other 51 percent in 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, however, demanded ExxonMobil to pay a cash of about US$400 million as the compensation for the earlier extension of the contract and for 50 percent of the block's working interest. But ExxonMobil only agreed to pay about US$40 million. Pertamina also demanded an increase in its interest in the Cepu oil field to 17 percent from the current 10 percent as part of the compensation.

The Cepu oil field, according to ExxonMobil?s finding, contains in excess of 250 million barrels of recoverable oil and 5.9 trillion cubic feet of gas. (*)