Pertamina asked to proceed with negotiations with ExxonMobil over Cepu block

The government has decided that state oil and gas firm Pertamina proceed with its negotiations with oil and gas producer ExxonMobil Indonesia which had offered only US$40 million for 50 percent interest in Cepu oil block in Central Java.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro, who is also chairman of government board of commissioners for Pertamina (DKKP), said on Tuesday the board did not want to meddle in Pertamina?s negotiations with ExxonMobil.

?It must continue to be purely business to business negotiations,? Purnomo told reporters on the sidelines of a seminar in Jakarta.

ExxonMobil?s contract for Cepu Block will expire in 2010, and Pertamina had considered not to extend the contract. But, ExxonMobil had strongly urged the government and Pertamina for 20-year extension of the contract.

Pertamina, which is entitled to fully own the Cepu block in 2010, said that it might consider to give ExxonMobil 50 percent interest in the block. Pertamina said however that ExxonMobil must pay it US$400 million in compensation of the 50-percent interest.

Purnomo disclosed last week that ExxonMobil had offered only $40 million for the 50-percent interest in the 1,670 sq kilometer block.

ExxonMobil presently fully owns the Cepu block, through its unit Mobil Cepu Ltd. It bought 51 percent interest in the block from Humpuss Group in 2000. It later purchased the remaining 49 percent interest from Australian firm Ampolex Ltd.

ExxonMobil announced last year that it had discovered oil reserve of 250 million barrels on the Cepu block. Meanwhile, government oil and gas research center LEMIGAS said later it was 450 million barrels. (godang)