Saturday, October 14, 2006

Exxon stands firm on Natuna contract

Avian E. Tumengkol and Benget Simbolon Tnb., The Jakarta Post, Jakarta

Despite uncertainty over its contract, giant oil and gas company ExxonMobil has expressed optimism that it will start developing the D-Alpha gas field in the Natuna Sea in 2008.

"The contract is still valid and stands as it is. There have been no official talks about the contract being revised, let alone terminated," Peter J. Coleman, the company's president and general manager for Indonesia, told the press in Jakarta on Thursday evening.

Coleman said that there had been no indications from the government that it wanted to discuss the contract. He said that he had met with Kardaya Warnika, the chairman of the oil and gas regulatory body, BPMigas, but nothing had been officially said about renegotiation.

"We had a meeting with BPMigas this afternoon, but they did not make any formal suggestions about amending the contract," he told The Jakarta Post.

He said that Exxon would stand firm, remarking: "We know how and where exactly our positioning is in this deal. We will continue with the development."

He noted, however, that the drilling work would only be able to start in 2008 if ExxonMobil and the Indonesian government signed a gas-production agreement next year.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said Tuesday the Indonesian government had terminated Exxon's contract to drill in the Natuna Sea and would negotiate a new contract.

But Coleman said that based on the amended contract signed in 1995, his company had the right to extend the contract, which matured in 2005, on a total of two occasions for a period of two years each time.

He also said Exxon had almost secured a gas-purchase contract from Petronas of Malaysia and was currently in final talks with both local and overseas buyers, including Thailand.

Exxon has delayed drilling in the Natuna D-Alpha area -- which holds an estimated 46 trillion cubic feet of gas, the largest in the Southeast Asian region -- because it has high carbon dioxide content, which makes production extremely expensive.

Maman Budiman, ExxonMobil's vice president for public affairs, said that due to the high cost of producing gas in Natuna, the revenue split between the government and Exxon should not be treated the same as in the case of other Indonesian gas fields, where production costs were much cheaper.

Based on the contract, the production split between Exxon and the government is 100 percent and zero percent, as compared to 35 percent and 65 percent in favor of the government in other gas fields.

However, Maman noted that the Indonesian government would get between US$13 billion and $26 billion for each billion cubic feet per day of gas sold from the Natuna over a period of 20 years, despite the existing production split.

Exxon has a 76 percent interest in the Natuna D-Alpha gas field, which was discovered in 1973 and is located off the western coast of Borneo island. Pertamina, Indonesia's state oil company, holds the remaining 24 percent.

Indonesia is currently trying to attract foreign investors to exploit its abundant reserves of gas and coal in order to increase revenue and to diversify its energy sources away from oil.


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