Pertamina sees huge losses if ExxonMobil's TAC in Cepu not immediately extended

State-owned oil and gas company Pertamina president director Ariffi Nawawi said on Tuesday that the company may suffer loss of opportunity amounting to around US$1.5 billion if the existing technical assistance contract (TAC) of ExxoMobil in managing the Cepu oil and gas block is not immediately extended.

The loss could be even greater because the above projection is based on an oil price assumption of around US$20 per barrel. Oil price has now surged to more than $30 per barrel.

"In our opinion, if we don’t cooperate with ExxonMobil now, Pertamina’s opportunity loss will be $1.5 billion. Moreover the oil prices are now at over $30 per barrel,” Ariffi said during a hearing with the House of Representatives’ Commission VIII in Jakarta on Tuesday.

ExxonMobil has demanded an early extension of the TAC, which expires in 2010, in order for the company increases investment in the block and boost oil production.

Ariffi said that even if Pertamina take over the block after ExxonMobil's contract expires in 2010, the former company could only start making production in 2014 as it needs a lot of preparation work.

“We know that we cannot operate immediately after the expiry of the contract. It will need at least 3 to 4 years. At the latest it can be started around 2014." (Godang)