Govt opposes Exxon, Pertamina Cepu oil venture

Indonesia?s government is opposed to a joint venture between state oil and gas company PT Pertamina and Exxon Mobil Corp. to develop the Cepu oil fields in Central Java, Bloomberg reported Friday.

?Such joint ventures will give the contractor, in this case Exxon Mobil, a higher return on investment compared to other production sharing contracts,? Kardaya Warnika, deputy head of Indonesia?s oil and gas regulator BPMigas, told reporters in Cirebon, West Java. ?It will make the government?s production sharing contracts not attractive anymore.?

International oil and gas companies usually receive a 20 percent return on their investments under production sharing agreements with Indonesia?s government, Kardaya said. The venture with Pertamina may give Exxon a return on investment of as much as 40 percent, he said. Exxon has the right to pump oil from Cepu under a so-called technical assistance contract with Pertamina.

Pertamina said last month it proposed to Exxon an equally owned venture to manage the Cepu fields once the U.S. oil company?s contract expires in 2010. Exxon has been seeking to extend its contract for 20 years to allow the company to exploit potential reserve of two billion barrels of oil and 11 trillion cubic feet of natural gas.

Exxon, the world?s largest publicly traded oil company, and Pertamina have been in dispute about which of them should finance the development of the Cepu fields. (*)