Indonesia gets more benefits if Cepu oil field is operated by Pertamina

Indonesia will receive more benefits if state owned oil and gas company Pertamina or other local companies take over the operation of the Cepu oil field from PT ExxonMobil Indonesia after the current contract ends in 2010, according to a study released by the government-owned oil and gas research center LEMIGAS, as reported by Republika daily on Monday.

The research center based its study on three scenarios. Option A: Pertamina operates the oil field with 100 working interest and 40%-60% percent production sharing in favor of the government. Option B: ExxonMobil operates the oil field with working interest of 50 percent (ExxonMobil) other 50 percent (Pertamina). In this scenario Pertamina receives cash compensation but at the same time it is responsible to pay tax of 35 percent. Option C: ExxonMobil as the operator with working interest of 78 percent (ExxonMobil) and 22 percent (Pertamina). In this option, Pertamina pays the 35 percent tax. The production split arrangement in both Option B and Option C is 35 percent for ExxonMobil and 65 percent to Pertamina (on behalf of the government).

According to LEMIGAS, if the Option A is chosen or if the oil field is fully operated by Pertamina, the government?s revenues from the oil field which has oil deposits of about 700 million barrels will reach US$6.782 billion. Of the total, about US$3.966 billion will go to the central government?s coffers, US$456 million to the provincial administration and another US$2.361 billion to Pertamina.

While if ExxonMobil is allowed to operate the oil field for another 20 years after the current contract ends (Option B) in 2010, the government will receive US$4.5 billion, Pertamina US$2.579 billion and ExxonMobil US$1.837 billion. Of the government?s revenue, about US$76 million go to the provincial administration.

Under the Option C, the Indonesian government will receive about US$6.27 billion (of the total, US$4.43 billion will go to the central government and US$85 million are paid to the provincial administration), Pertamina US$1.74 billion while ExxonMobil about US$2.66 billion.

Exxon?s proposal for the extension of its contract has sparked controversies among experts and government?s top officials. Some of them including State Minister for National Development/Chairman of the National Development Planning Board Kwik Kian Gie opposed the extension plan. The minister urged the government to terminate the contract and appoint Pertamina or other local companies to do the job so that larger parts of the benefits from the Cepu oil development will not go to foreign parties. (*)