Pertamina says wait for govt decision on Cepu giant oil block

State oil and gas company Pertamina said it was now waiting for the government?s decision whether or not to grant extension of Cepu oil block contract to US oil giant ExxonMobil Corp.

?Technically and financially speaking, Pertamina has capability to operate the block on its own when ExxonMobil?s contract expires in 2010. But the question is, can the government wait that long to generate revenues from the block, because ExxonMobil has made it clear it won?t make investment in the block unless the contract was extended,?Pertamina president Baihaki Hakim said in a parliamentary hearing Tuesday.

ExxonMobil initially planned to bring the oil onstream sometime this year to flow oil of around 150,000 barrels per day. But prolonged negotiation between Pertamina and Exxon Mobil put the development on halt. Baihaki said potential government revenue from Cepu giant field could reach US$ 300-400 million annually, a quite significant amount for cash-strapped government.

Baihaki said ExxonMobil could bring the oilfield into production as quick as one and a half year if the contract is extended.

?Pertamina will adhere to whatever the government will decide. If the government decides to give contract extension to ExxonMobil, then we will resume business-to-business negotiation, in which we will ask ExxonMobil to give Pertamina compensation for contract extension,? said Baihaki.

Mobil Cepu Limited, wholly owned subsidiary of Exxon Mobil acquired Cepu oil block from a company owned by former president Soeharto?s youngest son Hutomo Mandala Putra. Exxon Mobil announced the discovery of recoverable oil reserve of at least 250 million barrels in 2001, but some studies said the recoverable reserve could be as big as 500 million barrels plus 6 trillion cubic feet of gas.

Under the technical assistance contract, Exxon Mobil is allowed to operate Cepu oil block, which is owned by Pertamina. The contract of Cepu block will end in 2010. Exxon Mobil had intended to extend the block?s contract, but Pertamina asked for huge sum of cash compensation and 50 percent equity participation in return of contract extension, which Exxon Mobil had repeatedly rejected. (alex/godang)