Govt orders Pertamina to resume talks with ExxonMobil over Cepu block

Indonesia's new government plans to grant ExxonMobil a long-delayed extension of its contract to develop a giant oilfield and resolve other disputes with foreign investors, according to the country's chief economics minister, as reported by Financial Times.

Aburizal Bakrie, co-ordinating minister for the economy, said the government had ordered Pertamina, the state oil company, to restart negotiations with the US energy company over the massive Cepu field in the island of Java. The talks, which have been stalled since June by Pertamina's refusal to negotiate, are aimed at developing joint production operations at Cepu.

The move is a significant step towards resolving a high-profile case that has become an example of the hostile climate foreign investors often face in Indonesia.

In an interview with the Financial Times, Bakrie said the new government wanted to resolve Cepu and other disputes involving international companies in a show of its commitment to improving Indonesia's investment climate.

Bakrie said President Susilo Bambang Yudhoyono planned to raise the ExxonMobil case as well that of Karaha Bodas, a US power investor, during a meeting with President George W. Bush at the Asia-Pacific Economic Co-operation summit in Chile later this month.

The new deal with ExxonMobil, Bakrie said, would be built around an agreement discussed in June in which the US group promised to pay $125m to Pertamina in exchange for a 20-year extension of the current exploration contract, which expires in 2010. That agreement stalled when Pertamina's government-controlled supervisory board refused to sign on. A new management appointed in August also rebuffed Exxon.

Bakrie said Pertamina would now have to work with ExxonMobil, although he wanted to see a greater role in production for Pertamina in any new deal.

ExxonMobil has said it would invest more than $2bn in the Cepu field.(*)