Operators of the oil-rich Cepu block on the border of Central Java and East Java are in talks to secure a plot of commercial forestry concession controlled by state-owned forestry firm PT Perhutani after facing difficulties in purchasing public lands.
Energy and Mineral Resources Minister Purnomo Yusgiantoro said Thursday the operators were still negotiating with Perhutani after encountering problems in securing land around the oil concession project.
Purnomo said such measures had to be taken to help speed up the production of oil and gas, which are badly needed to jack up the country's declining oil production levels.
According to the newly-appointed chairman of the Upstream Oil and Gas Regulator (BPMigas), Raden Priyono, the operators wanted to secure around 960 hectares of the Perhutani concession.
"Everything is now on the right track," he said, adding the government had seen no other reason, aside from the land procurement, for the operators not to be able to meet the deadline set for the block's production.
U.S. energy giant Exxon Mobil Corp. and state-owned oil and gas company PT Pertamina are the operators of the Cepu block, which is estimated to hold 600 million barrels of oil and 1.7 trillion cubic feet of gas reserves.
The government has set a target for the operators to produce 10,000 barrels of oil per day by the end of 2008, following an agreement to fast-track the development of the block.
For the first phase, Cepu operators need to purchase some 600 hectares of land from local residents for its operation.
However, prices have jumped more than 1000 percent due to speculation from land brokers.
Landowners there have offered to sell their properties for Rp 300,000 (US$32) per square meter, up from the normal price of Rp 20,000 per square meter.
Rampant land speculation ahead of the construction has caused project-cost inflation and uncertainty for investors.
Numerous infrastructure projects have run aground due to problems related to land acquisition, with investors facing widespread protests and opposition from landowners, often backed by local administrations.
