Pertamina to drill 30 wells in Cepu next year

State oil and gas company Pertamina announced on Friday plans to drill 30 wells in the Cepu block next year, a move which is expected to spark further controversies over the huge oil and gas block.

The block, which is located in the border areas of Central Java and East Java and is believed to contain huge oil and gas reserves, is currently being operated by the subsidiary of American energy giant ExxonMobil Corp. It has signed a memorandum of understanding with Pertamina to jointly operate the block, yet no deal has been by both as each of them insisted to become the operator.

?Even though ExxonMobil is not yet ready to sign a cooperation agreement, we shall go ahead with the plans to drill the wells,? Pertamina?s president Widya Purnama told reporters on Friday.

?The drilling will be conducted in January or February next year,? Widya said, adding that Pertamina would allocate $100 million to finance the drilling program.

When asked who will provide the financing, Pertamina?s vice president Mustiko Saleh said: ?The amount is small for Pertamina.?

ExxonMobil is operating the block under the technical assistance contract that expires in 2010. Pertamina, who claims to be the owner of the block, initially wanted to take over the block after 2010. However, ExxonMobil has managed to gain supports from the administration of President Susilo Bambang Yudhoyono, who asked Pertamina to set up a joint venture with the American firm to develop the block. Pertamina and ExxonMobil have signed a production sharing contract with the government on the development of the block. Yet, each of the firms insists to become the operator of the block, causing a deadlock in the negotiations over the development of the block by both firms.

Analysts say Pertamina could face a legal problem if it goes ahead with its drilling program as legally the block is still controlled by ExxonMobil. Pertamina thus has to wait for the contract to end to launch its drilling program.

Widya however said Pertamina was ready to face the legal obstacle.

?We are ready to be brought to arbitration court,? he said.

When contacted, ExxonMobil?s spokesperson Deva Rachman refused to comment. (Godang/dino)