Pertamina asks ExxonMobil to limit production capacity

State owned oil and gas company Pertamina?s president Baihaki Hakim has urged ExxonMobil Indonesia to limit its crude oil production at the Cepu oil block in Central Java at between 40,000 and 50,000 barrels per day.

Baihaki said that the production should be limited to between 40,000 and 50,000 barrels per day for the remaining eight years of its contract which would end 2010. "Don?t produce too much because the massive exploration activities could cause fast depletion of the oil reserves," he said.

The Cepu oil block is estimated to contain oil reserves of 735 million barrels and gas reserve of 5.9 billion meter cubic. With its large oil and gas reserves, the oil block is considered as the largest finding during the last 10 years.

ExxonMobil has carried out exploration activities in Banyu Urip and Jambaran and the production is expected to start next year with a capacity of 50,000 barrels per day. The production capacity can be increased to 165 barrels per day.

The company has applied for the extension of its contract for another 20 years until 2030 but the company?s intention to have another 20-year contract has caused controversies after a number of the government?s senior officials demanded the oil and gas mining authority to transfer the operation of the oil block to local companies.

Pertamina earlier said that it would oppose 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 demands an increase in the ownership to 17.5 percent. 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.

The Cepu oil block, which was taken over by ExxonMobil?s subsidiary Mobil Cepu Ltd from a company owned by former president Soeharto?s youngest son Hutomo Mandala Putra alias Tomy, is expected to start production by 2003, with initial capacity of 50,000 barrels per day.

Exxon said that the operation of the oil block is not economically viable unless the company is given assurance to operate the oil block for another 20 years. (*)