Pertamina agrees to form 50-50 JV to develop Cepu block

State oil and gas firm Pertamina had agreed to form a joint venture with American energy firm ExxonMobil Corp. to develop the Cepu oil block, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said Monday.

"Pertamina has agreed to form a 50-50 joint venture, as proposed by the government," Purnomo told reporters.

Purnomo also said the government had no reservations about Pertamina's plan to issue bonds to partly finance the development Cepu through the new venture. But, Pertamina must "follow rules" in issuing the bonds.

Pertamina's upstream director Eteng S. Salam confirmed Purnomo's statement regarding the joint venture. He, however, refused to comment on Pertamina's plan to issue bonds.

ExxonMobil, whose technical assistance contract (TAC) on Cepu will expire in 2010, has struggled to extend its contract on the block for another 20 years. However, in the negotiations, Pertamina, which owns the block, kept asking for cash compensation and a 50 percent interest in the concession area. It remains unclear if Pertamina still demands cash compensation from ExxonMobil.

ExxonMobil has said it had discovered some 600 million barrels of oil and about 5 trillion cubic feet of gas in Cepu, which is located in the bordering area of Central and East Java. (godang)