Pertamina says capable to operate Cepu oil field

Pertamina's president Ariffi Nawawi said on Wednesday that the state owned oil and gas company has the capacity, both technologically and financially, to operate the Cepu oil field by itself.

"We are capable," Nawawi was quoted as saying by Tempo News Room.

He made the statement following reports that the government may turn down a proposal from American energy giant ExxonMobil to extend its contract on the field which is located on the border areas of Central Java and East Java.

He said that Pertamina had the experience and technology to operate the oil field. He also believed that many financial institutions would be ready to provide loans to help Pertamina develop the oil field.

The technical assistance contract held by ExxonMobil to operate the Cepu oil field expires in 2010. But the oil giant demanded an earlier extension of the contract for the certainty of its investment in the oil field for another 20 years.

The negotiation with the government is underway, but State Minister of State Owned Enterprises Laksamana Sukardi has said that there is a possibility that the extension proposal will be turned down and the concession will be transferred to another multinational firm which offers "attractive proposal".

Pertamina's former president Baihaki Hakim, demanded ExxonMobil to pay a cash of about US$400 million in compensation for the earlier extension of the contract. But ExxonMobil only agreed to pay about $40 million. Pertamina also demanded an increase in its interest in the Cepu oil field to 17 percent from the current 10 percent as part of the compensation.

ExxonMobil has found huge oil and gas reserves in Cepu. (*)