[Kabar-indonesia] Kalla: Exxon Natuna Ops Automatically Terminated

[Joyo at aol.com]

also: Exxon says to hold Natuna gas talks with Indonesia;
and Exxon Mobil Agrees To Talks With Indonesia On Natuna Ops

Indonesia VP: Exxon Natuna Ops Automatically Terminated

JAKARTA, November 2 (Dow Jones)--Indonesia's Vice President
Jusuf Kalla confirmed Thursday that U.S. oil giant Exxon
Mobil Corp. (XOM) has lost its contractual rights to develop
the Natuna D-Alpha gas field in the East Natuna Sea.

Exxon's contract was "automatically terminated" due to a
lack of substantial activity to develop Natuna, Kalla said.

"For 20 years, there hasn't been any very big action" by
Exxon on Natuna, he said.

Kalla made the comments during a question and answer session
on the second day of a three-day infrastructure development
conference in Jakarta.

Exxon Mobil, however, has denied any termination of their
Natuna development contract and said that legally, they
could continue development preparation until January 2009.

The Texas-based company said it remains committed to
developing the gas block despite the ongoing disagreement
with the government.

Exxon, which acquired the block in 1980, hopes to sign a
deal to supply natural gas from the block to Malaysia's
Petroliam Nasional Bhd. (PET.YY), or Petronas, by the end of
this year. The deal is expected to pave the way for the
development of the block, expected to commence in 2008 or
2009.

Exxon has estimated that the Natuna D-Alpha block holds 46
trillion cubic feet of recoverable natural gas reserves.

Exxon holds a 76% stake in the block and state-owned PT
Pertamina (PTM.YY) the remaining 24%.

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Exxon says to hold Natuna gas talks with Indonesia

JAKARTA, November 2 (Reuters) - Exxon Mobil Corp. has agreed
to talks with the Indonesian government on the huge Natuna
D-Alpha gas block after Jakarta said the operating contract
it holds had expired, an Exxon Mobil Indonesia official said
on Thursday.

Indonesian Oil Minister Purnomo Yusgiantoro said last month
the government had terminated the contract held by Exxon,
amid high extraction costs and a lack of buyers for the gas.

The U.S. firm has disputed this and said the contract allows
for two more years for it and Indonesian state energy firm
Pertamina to satisfy conditions or proceed with development
even if the terms for development of the field are not met
by Jan. 8, 2007.
"While Exxon Mobil still believes the current Natuna
contract remains valid, Exxon Mobil has agreed to enter
mutually beneficial discussions," Deva Rachman, an Exxon
Mobil spokeswoman, told Reuters.

"We expect these discussions to occur over the next several
months. We will continue to progress our technical and
marketing activities during this time," she added.

The firm has said it has made significant progress marketing
Natuna gas to credible buyers.

Separately, state oil company Pertamina chief Ari Soemarno
said it should be possible to resolve any disputes over the
Natuna gas block. Pertamina has 24 percent stake in block,
while Exxon has 76 percent.

"I think, the contractor and the government can find
solution on Natuna gas, considering current high oil price
development," Soemarno told reporters.

"If the government unhappy with the current gas split then
we can talk about how much the new split is," he said.

"However, the contractor must get enough benefit from the
operation of Natuna gas," he said.

Indonesian oil watchdog, BPMIGAS, has said the government
wanted better terms and conditions on Natuna gas. Vice
President Jusuf Kalla said last month Indonesia will give
Exxon top priority to renegotiate a new operating contract
for Natuna.

The Natuna D-Alpha block contains around 222 trillion cubic
feet (tcf) of gas, of which 46 tcf is thought to be
commercially recoverable, but the field contains about 70
percent carbon dioxide, making it expensive to develop and
difficult to sell. Despite the difficulties developing the
field, the move to end Exxon's contract may cause concern
among foreign investors about uncertainties of doing
business in Indonesia, compounding worries over the legal
system, labour and corruption.

Indonesia and Exxon Mobil signed a basic agreement in 1995
covering an estimated $40 billion to be invested in the
offshore gas project in the South China Sea.

However, tapping the reserves has proved difficult.

The gas in Natuna D-Alpha, about 1,100 km (680 miles) north
of capital Jakarta and 200 km east of the West Natuna fields
that are currently feeding gas to Singapore, accounts for
about a quarter of Indonesia's total gas reserves of 182
tcf.

Asia Pacific's sole OPEC member has far more gas than oil,
and is trying to phase out costly oil-fired power generation
and uses more of its cheaper, cleaner natural gas
domestically.

But the country faces limited supplies due to long-term LNG
export commitments, which it is reviewing.

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Exxon Mobil Agrees To Talks With Indonesia On Natuna Ops

JAKARTA, November 2 (Dow Jones)--U.S. oil giant Exxon Mobil
Corp. (XOM) Thursday said it has agreed to hold talks with
the Indonesian government to resolve a dispute about the
validity of the firm's contractual right to develop the
Natuna D-Alpha gas block.

Exxon Mobil has agreed to the talks despite the company's
belief that its production sharing contract for Natuna
"remains valid", an Exxon statement said, citing ExxonMobil
Oil Indonesia Inc. communications manager Deva Rachman.

"Exxon Mobil has agreed to enter mutually beneficial
discussions (and) we expect these discussion to occur over
the next several months," the statement said.

"We will continue to progress our technical and marketing
activities (for Natuna) during this time."

The discussions might result in changes in the previous
contract between Exxon Mobil and the Indonesian government,
Rachman indicated to Dow Jones Newswires, without further
elaboration. [ 02-11-06 0735GMT ]

Indonesia's Minister of Energy and Mineral Resource Purnomo
Yusgiantoro told reporters that he'd heard about Exxon
Mobil's decision and would report it to the cabinet, without
elaborating.

Any decision to reopen Natuna contract negotiations with
Exxon Mobil would hinge on agreement by the cabinet of
President Susilo Bambang Yudhoyono, Purnomo said earlier
Thursday on the sidelines of an infrastructure investment
conference in Jakarta.

The government's other options for Natuna's development
include re-tendering the production sharing contract for a
new round of bids, or handing over the block to state-owned
Pertamina (PTM.YY), Purnomo said, without further details.

Exxon's decision to go back to the negotiation table with
the government marks a climb-down for the company after
weeks of denial of government assertions that the firm's
Natuna contract had expired or been terminated.

Indonesia's Vice President Jusuf Kalla earlier Thursday
reiterated that Exxon Mobil's contract had "automatically
terminated" due to a lack of activity on Natuna over the
past 20 years.

Exxon Mobil has insisted that it has the contractual right
to continue development of the Natuna block until 2008 or
2009. The firm estimates Natuna holds 46 trillion cubic feet
of recoverable natural gas reserves.

In December, Exxon Mobil Indonesia Inc.'s President and
General Manager Peter J. Coleman told reporters the company
was proceeding with a "four-year plan" to deliver natural
gas from the Natuna D-Alpha block to foreign buyers by 2014.

But in October, both Purnomo and the chairman of the
official upstream oil and gas regulator BPMigas, Kardaya
Warnika, announced that the Exxon Mobil contractual right to
develop Natuna was no longer valid.
The Natuna spat has unsettling echoes of the lengthy
disagreement between Exxon Mobil and Pertamina over a joint
operating contract to tap the massive Cepu block in East
Java. Prior to its resolution in March, the dispute had
become a symbol among foreign investors and analysts of the
perils of contract enforcement in Indonesia.

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Joyo Indonesia News Service
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