Local governments buy in to lucrative Cepu oil block

The Jakarta Post ,  Jakarta   |  Sat, 02/23/2008 4:44 PM  |  Business

Four firms owned by four local administrative bodies on Friday acquired a 10 percent participating interest in Central Java's Cepu oil block from ExxonMobil Corporation and state-owned PT Pertamina.

The first two companies are PT Sarana Patra Hulu Cepu of Central Java provincial administration with 1.09 percent, and PT Blora Patragas Hulu of Blora regency, West Java, with 2.18 percent.

The other two companies are PT Petro Gas Jatim Utama Cendana of the East Java provincial administration with 2.24 percent, and PT Asri Dharma Sejahtera of Bojonegoro, East Java, with 4.48 percent.

After the acquisition, the remaining ownership in the Cepu oil and gas exploration block is held by ExxonMobil, with 45 percent by subsidiaries Mobil Cepu Ltd and Ampolex Pte Ltd, and 45 percent by Pertamina subsidiary PT Pertamina EP Cepu.

The signing ceremony for the acquisition was attended by Energy and Mineral Resources Minister Purnomo Yusgiantoro, West Java Governor Ali Mufiz, East Java Governor Imam Utomo, BP Migas vice chairman Abdul Muin, Pertamina president director Ari Soemarno and ExxonMobil Oil Indonesia vice director Maman Budiman.

The Banyu Urip field in the Cepu oil block is estimated to hold 250 million barrels of oil in reserve.

The exploration period will commence in May, with initial production expected to reach 20,000 barrels per day by the end of this year and 165,000 barrels per day by 2010.

Exxon and its partner Pertamina were awarded a 30-year contract -- until 2034 -- to develop the Cepu oil block which straddles the border between Central and East Java. The oil block has estimated reserves of around 600 million barrels of oil and 1.7 trillion cubic feet of gas.

The cost of developing Banyu Urip, the main oil field in the Cepu area, may exceed $2 billion, compared with the initial estimate of $1.2 billion, Ferederick Siahaan, Pertamina's finance director, said in Jakarta Friday.

The Indonesian government wants Cepu to start pumping crude oil by the end 2008 to help reverse a 10-year slide in output.

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