Pertamina boss doubtful on Cepu block operatorship

The Jakarta Post , Jakarta | Sat, 03/11/2006 7:58 AM | Business

Although the House of Representatives supports giving state oil firm PT Pertamina the operatorship of the Cepu block on the border between Central and East Java, some top officials of the company are doubtful about its ability to take charge.

Ari Soemarno, Pertamina's new president, said Friday that he was evaluating the ability of the company to operate the country's largest untapped oil field.

President Susilo Bambang Yudhoyono has urged an end to the four-year-old dispute between Pertamina and U.S. oil giant ExxonMobil Corp. as the country attempts to reverse its declining oil production. Meanwhile, ExxonMobil wants to develop the field to help meet its goal of increasing its global output by 23 percent by 2010.

Soemarno, 57, is trying to end the dispute over who should become the operator of the Cepu block, which will cost US$2.6 billion to develop and may produce 150,000 barrels of oil a day. Soemarno replaced Widya Purnama, who opposed giving Exxon the operatorship of the field, on Wednesday.

""Pertamina still has a desire to operate the field, but we are evaluating all our resources,"" Soemarno was quoted by Bloomberg as telling reporters in Jakarta on Friday.

He also said that the company had a lot of fields that needed to be developed besides the much-disputed Cepu block.

Meanwhile, in a Thursday talk show on Metro TV, the head of Pertamina's Cepu block exploration and production unit, Hestu Bagyo, said that his company would be unable to operate the block alone due to a lack of technology and finance.

Pertamina is scheduled to discuss the issue with the government in the next few days.

Despite the doubts expressed by these top officials, House of Representatives energy commission member Ramson Siagian said he was sure that Pertamina had the financial capability to operate the disputed block.

In a discussion in the House on Friday, he said that Pertamina could use last year's government dividend of Rp 12 trillion (US$1.3 billion) to finance the block's operation.

""It could use the dividend to finance operation before delivering the money to the state budget,"" he said, quoting the 2006 State Budget Law.

He also believed that Pertamina could find other sources of finance other than selling shares.

Currently, the government owns all of the company's shares.

Regarding technical matters, Ramson said that Pertamina could use the money to improve its technology capabilities.

He said the main problem for Pertamina concerned management, but that this had now been addressed after the government replaced the company's top officials.

""We have no doubt that Pertamina is able to operate the block,"" he said.

The discussion, which was also attended by energy commission members Tjatur Sapto Edy and Sutan Batugana, and a lawyer for many state-owned enterprises, Ari Puyono, concluded that the government should support Pertamina taking the operatorship of the block.

Tjatur said that Pertamina, had the right to operate the block under a 1987 ministerial decree. In addition, article 33 of the Constitution stated that national resources should be managed by state-owned firms.

""The President should stand up and tell Exxon and the U.S. Government that the block is supposed to be operated by Pertamina. He is not supposed to be afraid to defend Pertamina as the state oil firm,"" said Tjatur. -- JP/06

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