Purnomo rejects Pertamina proposal to rotate Cepu operatorship

State-owned oil and gas company Pertamina's demand to operate Cepu oil block for its first five years of production is unacceptable, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said Tuesday.

"I have been in this business for a while and I know that this (demand) is impossible," Purnomo told reporters.

In September, Exxon Mobil Corp. and Pertamina signed a production-sharing contract for Cepu, but have been unable to agree on a joint operations contract.

Pertamina has blamed the stalled agreement on the U.S. company's insistence that it be Cepu's sole operator for the entirety of the block's 30-year contract. Pertamina, on the other hand, wants to operate the Cepu block for the first five years ofthe contract.

Exxon Mobil has countered Pertamina's demand for shared operations by insisting that the Cepu memorandum of understanding signed in June explicitly granted the U.S. firm sole operating rights.

That impasse has delayed operations to tap Cepu's estimated reserves of in excess of 250 million barrels of recoverable oil.

Exxon has offered Pertamina an unspecified joint operations scheme, global market access for Cepu output, transfer of technology, environmental management assistance as well as acommitment to exploit Cepu to the maximum extent, Peter J. Coleman, President and General Manager of Exxon Mobil Oil Indonesia Inc., said Saturday during an official visit by Indonesian Vice President Jusuf Kalla to Cepu.

Exxon Mobil's previous compromise efforts to break the Cepu deadlock, including offers of key management slots for Pertamina executives in Cepu operations, have failed.

Kalla on Saturday called for an end to the deadlock and said that President Susilo Bambang Yudhoyono wanted a deal concluded within a week.

The government will submit a proposal to the Exxon Mobil and Pertamina negotiation teams. It will propose that the two sides set up a "joint operations committee" to manage Cepu's production, Purnomo said, without elaborating.

Purnomo said that Pertamina "will accept any decision by the government" on ending the Cepu deadlock, indicating that a resolution may finally be within reach.(*)