Govt set to move over Cepu block

With the government?s deadline for U.S energy giant ExxonMobil Corp. and state oil and gas firm PT Pertamina to agree on the operatorship of the Cepu block having expired Tuesday, the relevant ministers are now set to hold a meeting to decide on the matter, The Jakarta Post newspaper reported in its Wednesday edition.

Energy and Mineral Resources Minister Purnomo Yusgiantoro and State Minister for State Enterprises Sugiharto have arranged a Wednesday meeting to review progress in the negotiations between the two sides.

The government does not have a ready-made solution at hand, Sugiharto admitted early Tuesday after a hearing with the House of Representatives state enterprises commission and energy commission.

?We still want joint operatorship,? said Sugiharto. ?We need to study the latest developments in the negotiations (before deciding),? he added.

He declined to specify a timeframe within which the government would decide on which of the two sides would be appointed the day-today operator of Cepu, which is expected to produce 170,000 barrels per day at peak production, or 18 percent of the country?s current production.

ExxonMobil spokesman Maman Budiman said that although the government might take charge of the operatorship issue, his company would continue its negotiations with Pertamina.

?We are still talking and will continue to talk, ?said Maman.

Pertamina refused to comment on the expiry of the deadline, only saying that neither side had budged from its position.

?I don?t want to make any other statement,? said Pertamina vice president Mustiko Saleh. ?Everybody knows the situation. The problem is here is clear.?

Pertamina is insisting of having control of Cepu for the first five years of the US$2.6 billion project, saying that it would be able to keep costs lower than ExxonMobil.

Pertamina has also tried to make capital out of its position as a state company and the former owner of the block, which is located on the border between Central Java and East Java.

ExxonMobil, on the other hand, says that it has drawn up a detailed plan for the development of the block. The world?s largest publicly trading oil company also says that it has strong financial backing, the necessary technology, and better access to the required goods and services to ensure speedy production.

Vice President Jusuf Kalla said on Feb. 18 that Pertamina and ExxonMobil would have until the end of the month to reach an amicable settlement before the government would step in.

Indonesia has high hopes that the output of Cepu will lift its declining oil production and thus help the government balance the books. (*)