Pertamina and ExxonMobil make progress in Cepu talk

The negotiation between Pertamina and ExxonMobil Oil Indonesia on the extension of the technical contract of the Cepu oil field, Bojonegoro regency in Central Java have made a significant progress after the two companies achieved agreement on three important points in the contract, Koran Tempo daily reported on Monday.

Pertamina?s president director Baihaki Hakim said in Jakarta on Saturday that ExxonMobil Oil had acknowledged that the Cepu oil field was part of the concession areas currently owned by Pertamina. "This acknowledgement is quite important as an initial step towards the replacement of the current Technical Assistance Contract with Production Sharing Contract," he said.

According to Baihaki, the two companies had also agreed to use the current Technical Assistance contract as the base for the signing of the new contract in the Cepu oil field. ExxonMobil also agreed to use the same assumption particularly on the volume of the oil field?s oil reserves.

"The three-point agreement is considered a significant breakthrough in the negotiation on the extension of ExxonMobil?s contract in the Cepu oil field," Baihaki said.

The technical assistance contract held by ExxonMobil to operate the Cepu oil field will terminate in 2010. But the oil giant demanded the earlier extension of the contract for the certainty of its investment in the oil field for another 20 years.

The oil field was formerly owned by former president Soeharto?s youngest son Hutomo Mandala Putra alias Tommy. Humpuss sold 49 percent ownership in the oil block to Ampolex Ltd in 1997 and the other 51 percent in to ExxonMobil?s subsidiary Mobil Cepu Ltd in 2000 following the fall of the former authoritarian leader after more 30 years in power. Ampolex later sold its ownership to Mobil Cepu making the latter as the sole owner of the oil block.

The Cepu il field, according to ExxonMobil?s finding, contains 735 million barrels of crude oil and 5.9 billion cubic of gas.

Pertamina, however, demanded ExxonMobil to pay a cash of about US$400 million as the compensation of the contract. But ExxonMobil only agreed to pay about US$40 million. Pertamina also demanded an increase in its interest in the Cepu oil field to 17 percent from the current 10 percent as part of the compensation. (*)