It?s up to Pertamina to decide ExxonMobil?s contract: Purnomo
Friday, August 23 2002 - 04:06 AM WIB
"It is a business to business deal and Pertamina has the right to decide what to do with the contract," the minister was quoted as saying by Suara Karya daily. The minister added that the government and the board of commissioners of Pertamina had fully entrusted Pertamina to decide the future contract of the Cepu oil block.
Asked on State Minister of National Planning/Chairman of the National Development Planning Board Kwik Kian Gie?s opposition on the extension of the contract, Purnomo said that every body had the right to express their opinion.
The controversy over the extension of ExxonMobil?s contract in managing and operating the Cepu oil block started early this week after Kwik said that he opposed the plan to extend the contract and proposed Pertamina or other local companies to handle the future operation of the oil block, which is believed to have oil reserves of about 700 million barrels.
According to Kwik, the recent meeting of Pertamina?s board commissioners which included Purnomo as the chairman, himself, Minister of Finance Budiono and State Minister of State Owned Enterprises Laksamana Sukardi as members, accepted ExxonMobil?s proposal to have another 20 years to operate the oil block.
Although he opposed the contract extension, Kwik said he could not reject the agreement because the decision was made through voting, which according to him, violated the oil and gas regulations.
Besides Kwik, a number of oil experts and members of the House of Representatives (DPR) have also expressed their opposition against the extension of ExxonMobil?s contract and proposed the appointment of local companies to do the job.
Meanwhile the secretary of Pertamina?s board of commissioners told Bisnis Indonesia daily that the extension of the contract would be fully decided by Pertamina.
Pertamina has also said that it would reject the extension of the contract unless the company is given an extra cash and higher interest in the lucrative oil block as the compensation for the early extension of the contract which according to the existing agreement will expire until 2010.
Under the existing technical assistance contract, the government has a 65 percent interest in the Cepu oil block, Pertamina (10 percent) and Exxon (25 percent). Pertamina demands an increase in the ownership to 17.5 percent . This will reduce Exxon?s interest to 17.5 percent. The government?s ownership would to be maintained at the current level of 65 percent.
The Cepu oil block, which was taken over by ExxonMobil?s subsidiary Mobil Cepu Ltd from a company owned by former president Soeharto?s youngest son Hutomo Mandala Putra alias Tomy, is expected to start operation by 2003, with initial capacity of 50,000 barrels per day.
Exxon said that the operation of the oil block is not economically viable unless the company is given assurance to operate the oil block for another 20 years. (*)