Pertamina, ExxonMobil recommence talks over Cepu contract extension

Indonesia State-owned oil and gas company PT Pertamina and ExxonMobil Oil Indonesia Inc have begun renegotiating the latter's contract extension over the Cepu oil block, the Rigzone.com reported on Monday citing Pertamina president Widya Purnama as saying.

"We are currently in talks under a business-to-business context," Purnama told a hearing with legislators of the House of Representatives' Commission VI, which oversees trade, industrial and investment affairs.

He said if ExxonMobil wants a contract extension it should pay Pertamina a higher compensation than the previous agreed amount of US$400 million.

Located in East and Central Java, the block is estimated to hold reserves of 170,000-200,000 barrels per day, Purnama said.

The block belongs to Pertamina but ExxonMobil operates it under a technical assistance contract, which expires in 2010. The U.S. firm has been seeking an extension to make further investment in Cepu feasible.

Last year, Purnama backed down from an earlier extension agreement that was signed by ExxonMobil and the the previous Pertamina management.

The previous agreement assumed an oil price of $20 per barrel, which Purnama said is unrealistic.

He said he told ExxonMobil that Pertamina may also offer the Cepu contract to competitors through a tender, although ExxonMobil will still be the preferred bidder.

If Pertamina were to develop Cepu on its own it will need $2 billion for investment and must wait after ExxonMobil's contract expires in 2010, he added.

The government has been pushing for Cepu's immediate production to lower the country's dependence on imported oil.(*)