Pertamina, Exxon finalize joint operation agreement for Cepu oil block
Thursday, March 9 2006 - 02:43 AM WIB
Lawyers for both sides were on Wednesday poring over a late draft of a long-delayed "joint operating agreement" that would clear the way for ExxonMobil to lead development of the Cepu oil block, according to people close to the negotiations. The deal could be signed as early as today (Thursday).
The legal work came as Jakarta last night installed a new management at Pertamina to replace the chief executive and other senior managers who helped stall a final deal with ExxonMobil for almost 10 months after the signing of an outline agreement last June.
The new chief executive is Ari Soemarno, a German-educated engineer who has worked at Pertamina since 1978 but is viewed by some insiders as a good candidate to lead a new round of reforms at the company. He replaces Widya Purnama.
Development of the Cepu block ? which is expected to yield up to 170,000 barrels per day when production begins in 2009 ? is seen as crucial for Indonesia, the Organisation of the Petroleum Exporting Countries' only Asian member. It would give a badly needed boost to production, which is now at a 25-year low of just over 900,000 bpd and help Indonesia regain its status as a net exporter of crude petroleum.
But the dispute over Cepu has also become a high-profile example for energy and other foreign investors of the difficulties of doing business in Indonesia, in spite of promises of accelerated reforms from the 16-month-old government of retired general Susilo Bambang Yudhoyono.
Ari pledged Wednesday to solve the Cepu dispute within the first 100 days but added that a resolution could come sooner. "We don't want to delay the production any longer since the Cepu production is very important," he said.
Officials in Jakarta sought to link the management change at Pertamina to the need for a corporate restructuring at the ailing state oil company rather than the Cepu case in order to defuse opposition from nationalists.
Maman Budiman, an ExxonMobil official in Jakarta, declined to comment on the changes in Pertamina's management but said the signing of a joint operating agreement was "very close".
Pertamina declined to comment on the timing of the signing. However, negotiators from both sides are understood to have been meeting intensively in Jakarta to finalise the text of the joint operating agreement.
The meetings followed government intervention last month to resolve a stalemate over who would lead development of Cepu, during which it was made clear to Pertamina officials that ExxonMobil should operate the field, according to people close to the negotiations. (*)