Govt to form task force to negotiate with ExxonMobil

The government will form a task force, comprising officials from the State Ministry of State Enterprises and state oil and gas company Pertamina, to negotiate with American energy giant ExxonMobil Corp. on the extension of the Cepu contract.

State Minister of State Enterprises Sugiharto said on Monday during the Bimasena Energy and Mineral Conference 2004 in Jakarta that the task force would map out the ?matrix of issue? related to the Cepu block and find out the best bargaining position in future negotiation with ExxonMobil

He said he had met with visiting ExxonMobil?s president Rex W. Tillerson over the issue and both expressed eagerness to restart negations.

The Cepu block is located in the border area of Central Java and East Java. The block belongs to Pertamina and was operated by the state firm until early 1990s, when it transferred the operation to the youngest son of former President Soeharto, Hutomo Mandala Putra. ExxonMobil took over the operation of the block in late 1990s and, after some explorations, found huge oil and gas reserves there.

ExxonMobil?s contract on the block is due in 2010 and the firm wants to extend the contract to make sure it will get return on investment. The firm initialed a heads of agreement (HOA) with the former management of Pertamina in the middle of the year to form a joint venture to develop the block. However, the new management of Pertamina rejected the HOA and voiced intention to develop the block by itself.

Sugiharto said the instruction to resume the negotiation came from President Susilo Bambang Yudhoyono and Coordinating Minister of the Economy Aburizal Bakrie.

The Cepu issue was reportedly among the topics discussed by Susilo and the U.S. President George W. Bush in the recent APEC summit in Santiago, Chile.

Sugiharto said in the future negotiations with ExxonMobil, Pertamina would use the concept to be made by the planned task force, instead of the HOA initialed by the previous management.

In the negotiations, he said, Pertamina would negotiate for ?the maximum benefits of the nation?, adding that the government wanted a quick development of the block to ease the state budget?s burdens. If Pertamina is to develop the block by itself, it will only able to do so after ExxonMobil?s contract expires in 2010.

The block is believed to produce up to 200,000 barrels of oil per day and a large amount of natural gas.

Sugiharto further said the government or Pertamina would hire a lawyer to review ExxonMobil?s contract, but he did not specify the purpose of the review. (Alex)