Kwik rejects extension of Exxon Mobil?s contract on Cepu oil block
Wednesday, August 21 2002 - 04:08 AM WIB
Kwik?s opposition was, however, not enough to block the oil giant?s demand as other members of the state owned oil company Pertamina?s board of commissioners voted in favor of the company?s proposal.
Kwik said that the board of commissioners led by Energy and Mineral Resources Minister Purnomo Yusgiantoro held a meeting on August 14 to discuss ExxonMobil?s proposal to extend its contract on the Cepu oil which will end on 2010 to another 20 years until 2030. Although he opposed, the decision was made through a voting process.
According to him, the decision making process through a voting is against the regulation No.8/1971 on Pertamina, which states that if a decision can not be made through a negotiation process, the case should be brought to President. "The decision on the extension of ExxonMobil?s contract should therefore be withdrawn," he said.
Besides Kwik and Purnomo, other members of the board of commissioners include State Minister for State owned Enterprises Laksamana Sukardi, Finance Minister Budiono and State Secretary Bambang Kesowo.
Kwik said that he opposed the extension in order to give the Indonesian people the opportunity to operate and manage the Cepu oil block, which has proven oil reserves of about 735 million barrels. The oil finding in the block is reported to be the largest in the last 10 years.
When confirmed, Purnomo, however, denied that the board of commissioners had held a voting to decide ExxonMobil?s proposal. "The decision will based on negotiation between Pertamina and Exxon," he said.
Pertamina has also rejected 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 was reported to demand at least 17.5 percent interest. 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.
Earlier media reports said that the Cepu oil block was expected to start operation by 2003, with capacity of 50,000 barrels per day. The production would be increased to 200,000 barrels per day. The oil block, which is directly operated by Exxon?s subsidiary Mobil Cepu Ltd, has proven oil reserves of about 2 billion barrels. (*)