Pertamina wants termination of Exxon contract in Cepu

Pertamina will probably oppose the proposal of ExxonMobil Indonesia to extend its contract over the Cepu oil field in Bojonegoro, Eat Java to another 20 years and then take over the operation of the field from the American oil company, Koran Tempo reported on Thursday.

Pertamina?s vice president Mustiko Saleh said in Jakarta on Wednesday that it would be better for Pertamina not to extend the contract and operate the field on its own.

With its large oil reserves, the Cepu oil field could become a major contributor of Pertamina's future revenues. "It will therefore more profitable for Pertamina, if it operates the oil field by itself," he was quoted as saying.

He, however, acknowledges that Pertamina's new board of directors have yet to issue their position regarding the future of the Cepu oil field. He said that the new management team was still studying the proposal submitted by the former board of executives.

According to him the board of commissioners is also against the extension of the contract. "It seems that the commissioners do not really agree with the extension proposal," he added.

The technical assistance contract held by ExxonMobil to operate the Cepu oil field will terminate in 2010. But the oil giant demanded an earlier extension of the contract for another 20 years for the certainty of its investment in the oil field.

The oil field was formerly owned by former president Soeharto's youngest son Hutomo Mandala Putra alias Tommy. Humpuss sold 49 percent ownership in the oil field to Ampolex Ltd in 1997 and the other 51 percent in to ExxonMobil's subsidiary Mobil Cepu Ltd in 2000 following the fall of the former authoritarian leader after more than 30 years in power. Ampolex later sold its ownership to Mobil Cepu making the latter as the sole owner of the oil field.

Pertamina's former president Baihaki Hakim, demanded ExxonMobil to pay a cash of about US$400 million as the compensation for the earlier extension of the contract. But ExxonMobil only agreed to pay about US$40 million. Pertamina also demanded an increase in its interest in the Cepu oil field to 17 percent from the current 10 percent as part of the compensation.

ExxonMobil has found huge oil and gas reserves in Cepu. (*)