Purnomo says fate of Cepu TAC difficult to decide

The government admitted Wednesday that it was quite difficult for it to decide whether to approve the request of oil producer ExxonMobil Oil Indonesia to extend its Technical Assistance Contract (TAC) for Cepu block in Central Java.

?The government has found it quite difficult to make decision on the matter. We are continuing discussions about it,? Minister of Energy and Mineral Resources said in a parliamentary hearing.

The minister said that the Cepu TAC issue had been discussed in a limited cabinet meeting on Monday, which was chaired by President Megawati Soekarnoputri. The meeting turned out no conclusion, he said.

In the parliamentary hearing Purnomo explained that the government could make decision on the fate of the Cepu block only after ExxonMobil and state oil and gas firm Pertamina had concluded their negotiations.

The minister added that the government also had to take into account the fact that large investments would be required to produce oil from the Cepu block.

The Cepu TAC will expire in 2010, and ExxonMobil had asked for contract extension for another 20 years.

Pertamina demanded ExxonMobil to pay it a cash of about US$400 million as compensation for the earlier contract extension, and for a 50-percent stake in the Cepu block it was willing to surrender to the American company. ExxonMobil however only agreed to pay about $40 million.

The Cepu field, according to Exxonmobil?s findings, contains more than 250 million barrels of recoverable oil, and 5.9 trillion cubic feet of gas. (godang)