Pertamina seeks 50 percent stake in Cepu

State oil and gas company Pertamina is seeking to acquire 50 percent shares in the Cepu technical assistance contract (TAC) block in Central and East Java owned by American energy giant ExxonMobil.

"We ask for 50 percent shares," Pertamina's president Baihaki Hakim told reporters on the sidelines of the ceremony to sign oil and gas contracts.

Aside from the 50 percent shares, Baihaki said, Pertamina also asked that the local administrations be allowed to have an equity participation in the oil block and the crude oil from the block be processed in Indonesia.

"We are intensively negotiating with ExxonMobil," he said.

ExxonMobil recently announced that it had discovered an oil reserve of more than 250 million barrels in the block, from which the company could produce up to 100,000 barrels per day (bpd) in 2004.

ExxonMobil offered Pertamina a 10 percent stake in the block, but Baihaki said the offer was too small in view of the fact the block was originally owned by Pertamina.

Baihaki said PT Humpuss Patragas, owned by former President Soeharto's son Hutomo Mandala Putra, had taken over the block in 1990 in what he described as "hostile takeover".

Humpuss later invited Ampolex Pty, an Australian firm controlled by ExxonMobil, to jointly develop the field and at last sold its shares to ExxonMobil.

TAC was initially designed to help local companies, which were interested in oil business but did not have big budget for high-cost explorations. Under this contract, Pertamina allows the TAC companies to develop fields which had been explored by the state company.

Foreign contractors, who have big budgets, are usually given production sharing contracts (PSC, which cover unexplored areas.

Baihaki said under the TAC, ExxonMobil takes 30 percent of the oil production from Cepu with the remaining 70 percent going to the government. In comparison, under the production sharing contract (PSC), contractors take only 15 percent of their oil output, while the government take the remaining 85 percent.

Baihaki said Pertamina had not intention to change the Cepu TAC into PSC because, he said "a contract is a contract".

He noted however that the Cepu TAC was due in 2010 and the chance for ExxonMobil to extend the contract in the future would depend on its willingness to find a win-win solution in its current negotiation with Pertamina. (Alex/Godang)