Pertamina demands key role in Cepu

The Jakarta Post ,  Jakarta   |  Tue, 03/07/2006 7:47 AM

The Jakarta Post, Jakarta

Although softening its stance by offering to share management of the Cepu block with U.S. energy giant ExxonMobil Corp., state oil and gas firm PT Pertamina is insisting on taking command in the first five years of the lucrative block's operation.

Pertamina wants the main positions of general manager, operation manager, field manager and finance manager in the organizational structure, the firm's director for upstream activities, Harry Kustoro, said Monday.

Slots for exploration manager, as well as administration and support manager, would be reserved for ExxonMobil, he added.

Pertamina proposes the positions be rotated every five years with ExxonMobil, but is steadfast that it should be awarded the first term, when the block's peak production of an estimated 170,000 barrels per day would be attained.

""We are optimistic that we can be more efficient than ExxonMobil,"" said Harry.

Pertamina's proposal is similar to that of ExxonMobil, except that the latter requested that its subsidiary Mobil Cepu Ltd. take charge of day-to-day operations of Cepu for the duration of 30 years, with ""capable"" Pertamina officials invited to hold management positions.

ExxonMobil argues that rotating operators will lead to confusion about accountability for errors.

Both operatorship proposals include a joint operating committee (JOC), which will include ExxonMobil, Pertamina and regional-owned firms holding stakes according to participating interests in Cepu, which straddles the border between Central and East Java.

The JOC would have the authority to approve the annual work plan and budgets for the block, as well as the operating structure.

The government, which took over the operatorship issue on Feb. 28 after the companies failed to reach agreement, is due to make a decision. It was expected last week but was delayed until President Susilo Bambang Yudhoyono was able to consult with related ministers after returning from an overseas trip last Friday.

The House of Representatives' Commission XI on financial affairs has recommended the government give Pertamina control of the block.

The government should award the operatorship of the block, estimated to hold about 500 million barrels of crude, to the company to raise its performance and financial structure and subsequently increase its contribution to the state budget, the commission concluded after a hearing with the state firm on Friday.

Pertamina's president Widya Purnama assured House members that the company was fully capable of operating the block, whose peak production would surpass the company's total output from all its current fields across the country. In the hearing, Widya said the operation of the block would be as easy as ""flipping over the palm of one's hand"".

The controversy over the operator has extended into the political sphere, with several legislators and members of Regional Representatives Council stating their objections to the Texas-based company's taking control of the US$2.6 billion project.

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