Kalla warns lawmakers off Cepu oil and gas block

Lawmakers’ opposition to the ongoing negotiations to resolve a serious contract dispute over the Cepu oil and gas block between state oil and gas firm PT Pertamina and U.S. company ExxonMobil has irked Vice President Jusuf Kalla, The Jakarta Post newspaper reported in its Friday edition.

Kalla has responded by telling legislators “not to interfere in the government’s domain.”

“There is no way that a negotiation process by the government with another party can be conducted jointly with legislators. Such a process is part of the government’s domain, and legislators should not interfere,” he said on Thursday.

Kalla was not at all pleased with the decision made during Wednesday’s hearing between the House of Representatives’ Commission VII for energy and mining and Pertamina, wherein they all agreed to oppose any outcome resulting from the negotiations.

The legislators argued that their opposition was sparked by the “questionable establishment of the negotiating team”, in which the members were appointed without an official government letter.

They also questioned Pertamina about the negotiating team as it was not clear whom they were representing.

The Commission also grumbled that the negotiations should be entirely handled by Pertamina executives, since it was a business-to-business dispute instead of a government-to-business problems.

Despite the rejection, Kalla insisted that the government would go ahead with the ongoing process for the sake of the people’s welfare since the Cepu block – which is located on the border of Center Java and East Java and owned by Pertamina but operated by ExxonMobil Indonesia under a technical assistance contract set to expire in 2010 – has a great amount of oil and gas reserves.

The Cepu block is estimated to have two billion barrels of potential oil reserves and 11 trillion cubic feet of potential gas reserves, which is expected to boost Indonesia’s oil output by 18 percent. Output has been declining over the last five years.

Pertamina agreed to extend a contract only for the Banyu Urip field, the largest in the Cepu area, and demanded a 70 percent participating interest in the field, President Director Widya Purnama said on Wednesday, Bloomberg reported. The firm also wants Exxon to pay all of the $1.6 billion needed to develop the field in the first three years.(*)