Pertamina to start Cepu exploration despite BP Migas' objection

State-owned oil and gas company Pertamina will go ahead with its plan to begin exploration activities at the Cepu oil block in February next year despite the opposition from the upstream oil and gas regulatory agency BP Migas.

Speaking to reporters on Friday, the deputy chairman of Pertamina Mustiko Saleh said that the government should support Pertamina's plan because the existing regulation clearly stated that the development of the oil block should be speeded up in order to cope with the continued decline in the country's oil production.

He acknowledged that negotiations with ExxonMobil Indonesia had been deadlocked because the company refused to rotate the operatorship of the oil block with Pertamina.

"Exxon continues to insist to become the sole operator of the oil lock for 30 years until the end of the contract. Pertamina wants to take turns in the operatorship for every five year, but our proposal is rejected," he said.

He added that because Exxon refused to share the

operatorship, Pertamina felt it also had the right to go alone in operating the oil block. "For this, we would soon propose the plan of development (PoD) to BP Migas so that we could begin drilling activities in February, next year," he said.

The head of BP Migas Kardaya Warnika said early this week that the PoD for Cepu oil block should come from both Pertamina and ExxonMobil Indonesia because the two companies have the equal rights to develop the oil block.

"If the PoD comes from Pertamina alone, we will reject the proposal," he was quoted as saying.

The government signed the new contract for the development of the Cepu oil block with its operators Pertamina and ExxonMobil Indonesia recently after prolonged negotiations.

Under the new agreement, Pertamina and ExxonMobil will have participating interest of 45 percent in the Cepu oil block, each. The other 10 percent will be allocated to the local government which oversees the territory where the oil block is located.Both oil giants however want to become the operator of the massive oil block.

ExxonMobil formerly operated the Cepu oil block under technical assistance contract with Pertamina.The contract should have ended in 2010 but the oil giant demanded the earlier extension of the contract for the certainty of its investment in the oil field foranother 20 years.(Godang)