Pertamina, ExxonMobil unlikely to reach deal on Cepu this week

Minister of state enterprises Sugiharto said Thursday that Pertamina is unlikely to be able to conclude negotiation by Friday with Exxon Mobil Corp. over the country's largest untapped oil field, Dow Jones reported.

"I'm not confident that they will reach an agreement (on the Cepu field dispute) over the next two days," he said.

He declined to give further details on the snags encountered during the latest talks between the two companies.

Last month, a government official said the Indonesian authorities hope the two parties could resolve their differences by May 20. The latest round of negotiations started in April.

Exxon bought the rights to the Cepu field in 1999 from a company run by a son of former President Suharto. Shortly thereafter, it discovered that Cepu contained a commercial quantity of crude oil. But because Exxon's contract is due to expire in 2010, Exxon has declined to invest in the deep-drilling equipment that it needs to tap the field until the company gets its contract extended.

Pertamina's management terminated an earlier round of discussions, saying it would develop the oil field located in East Java on its own, without having to share the oil with Exxon.

The U.S. company plans to invest as much as $2 billion in the field if a contract extension can be worked out.

With estimated reserves of some 600 million barrels of crude oil, the dispute over the Cepu field has been frequently cited as an example of the policy confusion that has caused Indonesia's crude oil production to plunge in recent years, turning the country into a net importer of crude oil during several months last year.

President Susilo Bambang Yudhoyono wants the dispute with Exxon to be fixed quickly, as a resolution would help pave the way for OPEC's only Southeast Asian member to boost its crude output and regain its status as a net oil exporter.(*)