Pertamina, Exxon stick to their guns on Cepu

Despite having been deadlined last week by vice president Jusuf Kalla to settle row by the end of this month, dispute over Cepu block operatorship still drags on as state oil firm Pertamina still wants to share operatorship of the $2 billion Cepu oil block on a rotating basis, a company official said on Monday.

"Pertamina proposes a rotating operatorship every five years," Pertamina's spokesman, Mochamad Harun, said in an e-mailed statement.

"The main reason Pertamina proposed this option is national interest. Pertamina, owned by the government, should be given a chance to grow."

Exxon Mobil and Pertamina have been locked in dispute for months over which should operate the gianf Cepu block in the border of Central and East Java, despite an agreement last year that seemed to set the stage for development.

Pertamina's statement came after Vice President Jusuf Kalla said on Saturday President Susilo Bambang Yudhoyono wanted settlement in a week of the dispute over Cepu, which promises to boost the Asian OPEC member's lagging production.

In a separate statement, Exxon too stuck to its position that it is the rightful operator of the block under the agreement signed last year.

"Mobil Cepu Ltd. is to be appointed as the operator in Cepu block in accordance with the memorandum of understanding that was signed in June," Exxon said in the statement e-mailed late on Sunday.

"Exxon Mobil will allow Pertamina officials (in Mobil Cepu Ltd.), even in important positions."

The dispute has cast a cloud over one of Exxon's biggest undeveloped oil finds and OPEC member Indonesia's best hope of stemming declining output.

Many of Indonesia's operating oil fields are old and suffering from production declines.

Cepu, Indonesia's biggest oil discovery in decades, is estimated to have a recoverable reserve of up to 600 million barrels, and is expected to produce ultimately up to 180,000 barrels per day, which would boost the country's production by about 20 percent from current levels.

The government has projected Cepu would begin production in 2008 after an estimated $2 billion in investment, but that date may be pushed back if negotiations drag on.(*)