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Thursday, February 09, 2006

Purnama says he may quit over Cepu field dispute

Widya Purnama, head of Indonesia's state oil company PT Pertamina, said he will quit unless the company leads the operation of the country's Cepu oil field, which it plans tojointly develop with Exxon Mobil Corp.

"Pertamina should become the operator of Cepu," Purnama told a parliamentary hearing in Jakarta yesterday. "We can jointly operate Cepu in many forms or rotate the operatorship later, but Pertamina should be the leader or I would resign."

The dispute between Exxon and Pertamina over which company will operate Cepu, Indonesia's biggest untapped oil reserves, has stalled its development for four years. The field, located in the border of Central and East Java provinces, may contain as much as 500 million barrels of oil and could add about 18 percent to Indonesia's production.

President Susilo Bambang Yudhoyono wants the companies to start production from Cepu in 2008. Pertamina should become the operator of the field for the first five years and rotate the lead with Exxon every five years, Purnama said. The company wants to operate Cepu to be able to better control costs, he said.
The government wants Pertamina and Exxon, the world's biggest publicly traded oil company, to set up a joint operating unit to make decisions and alternate control of cash flow and fieldoperations, Vice President Jusuf Kalla said on Nov. 28.

Exxon and Pertamina are still in talks, said Maman Budiman, vice president of Exxon's Indonesian unit. "We hope to reach an agreement as soon as possible," he said by telephone today. Lower Costs Exxon has offered Pertamina "key" management positions in a committee that will supervise Mobil Cepu Ltd., a unit Exxon set up to operate Cepu, in a bid to end the dispute,Peter J. Coleman, president of Exxon's Indonesian unit, said on Dec. 12.

The supervisory body will oversee Mobil's work and have the authority to approve budgets and expenditures, he added. Pertamina can drill Cepu at US$4 million for each well, a cost that is a third of that proposed by Exxon, Purnama said.

On Sept. 17, Exxon and Pertamina signed an agreement with the state oil and gas regulator, BPMigas, giving the companies a 30-year license to develop Cepu. The agreement didn't identify theoperator and left the decision to the two companies.


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