[Kabar-indonesia] Govt mulling 3 options for Natuna block

[Joyo at aol.com]

The Jakarta Post
November 3, 2006

Govt mulling 3 options for Natuna block

Andi Haswidi, The Jakarta Post, Jakarta

The government is currently considering three options for
the future of Block D in the Natuna gas field, which is
subject to a dispute involving American oil giant
ExxonMobil.

The options are to retender the contract, give the
exploration rights to state-owned oil firm PT Pertamina or
to renegotiate the deal with Exxon.

"The three options are still available to us now, but we
will have to make a decision soon," Energy and Mineral
Resources Minister Purnomo Yusgiantoro told reporters
Thursday at the Infrastructure Conference and Exhibition
2006 in Jakarta.

Purnomo said that given that the exploration work would cost
billions of dollars, the decision would not be made by his
ministry alone but would have to go to the full Cabinet.

The American oil giant has insisted that it still holds the
rights to develop the Natuna gas field based on the contract
awarded to the company more than 20 years ago. However, the
government argues that the contract has been terminated
because the company failed to commence development of the
gas field.

ExxonMobil spokesperson Deva Rachman told The Jakarta Post
that the company was convinced the current Natuna
production-sharing contract remained in effect.

"ExxonMobil has agreed to enter mutually beneficial
discussions. We expect that these discussions will take
place over the next couple of months," Deva said.

Responding to growing investor concern over the termination
of ExxonMobil's rights over the gas field, Purnomo said that
the government would never violate the sanctity of contract.

Purnomo argued that Exxon's contract had been automatically
terminated as the company failed to follow the required
procedures for extending it.

"If a company wants to extend a contract, it has to present
feasibility studies. You've got to give the government the
complete facts, the economic analysis. You have to tell us
your reasons for extending the contract," Purnomo told
investors at the conference.

"At that time, the company only submitted one letter
(requesting an extension) to the Rachmat Sudibyo, then head
of BP Migas (oil and gas regulatory body)," he said, "This
was not enough," Purnomo insisted.

Vice President Yusuf Kalla, who had been at the conference
earlier, also defended the government's stand on the
contract, saying that the government had not broken its
agreement with ExxonMobil.

"The fact is that Exxon obtained the contract 20 years ago
and the contract was extended twice. Within that 20-year
period, they did almost nothing (to bring the gas field
onstream)," Kalla argued.

Based on the contract, the production split between Exxon
and the government is 100 percent to zero percent in favor
of Exxon, as compared to 35 percent to 65 percent in favor
of the government in other gas fields. The government has
argued that given current high oil prices, the production
split needs to be changed.

Exxon has said that the Indonesian government would still
get between US$13 billion and $26 billion for each billion
cubic feet of gas sold from Natuna over a period of 20
years, despite the existing production split.

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Joyo Indonesia News Service
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