Wednesday, November 16, 2005

Govt threaten to handover Cepu to others

Chief economic minister Aburizal Bakrie said if ExxonMobil and Pertamina fail to reach an agreement before the end of next month, government might takeover the block and handover it to other oil and gas company.
"The end of the year is the deadline for both companies to have a deal. What the government can do in a continuing deadlock is takeover the block and give to other company," he said yesterday.
ExxonMobil and Pertamina signed a memorandum of understanding (MoU) in June to end the four-year dispute over the rich oilfields in East Java regencies of Bojonegoro, Tuban, and Blora. In September, government awarded both companies a cooperation agreement to develop the oil reserves that capable to produce 200,000 barrel oil equivalent per day. The state would get 70% to 85% of the oil output while contractors 15% to 30% depending on oil price.
Out of the contractors revenue split, Pertamina would get 45%, Exxon 45%, and a company to be established by local administrations 10%.
But commercial operation of the project is pending on a joint operating agreement (JOA) which elaborates the detail of cooperation. Most of the items under the JOA negotiation had been completed except the operatorship. Under the June MoU, Exxon explicitly declared as the operator, but Pertamina proposed a rotating system in which the company would be the operator for first five years to be followed by Exxon for the next five years. Pertamina said the system is applicable and has been implemented in other countries, while Exxon said that technically the system is difficult to be implemented as it would result in various transitions over the 30-year contract. Such transition would potentially delay the commercial operation and the risk would be higher. Risk perception in the eyes of lenders would high as well.
Both the MoU and cooperation agreement (KKS) actually dictated that all important decisions should be taken by a Joint Operating Committee (JOC) with representatives of Exxon, Pertamina, and 10% participating interest with proportional voting rights. With such scheme, actually the operatorship should not be an issue anymore.
But that's the fact. Deadlock of negotiation would end up with total mess for both companies. Some accused Pertamina for nursing the deadlock with the hope of government intervention i.e. takeover the block and give it to other company.
In the past, PetroChina was reportedly approaching government officers for a possible takeover of Cepu project from Exxon. Taufik Kiemas, husband of president Megawati Soekarnoputri, was rumored of having special relationship with PetroChina. Most of Pertamina's member of board of directors are appointed by Megawati's administration. Widya Purnama, Pertamina CEO, is a close confidante of Laksamana Sukardi (former minister for state-owned enterprises), while Mustiko Saleh (vice president director) is the big brother of Megawati's adjudant.
In this administration, PetroChina is also reportedly lobbying Vice President Jusuf Kalla through his brother-in-law Susanto Supardjo. PetroChina has two joint oil explorations with Pertamina in Tuban and Salawati, both in East Java.
Would it be PetroChina that finally get Cepu? How about Medco Energi, Energi Mega Persada (associated with Bakrie), Petronas, or other oil giants?
Surprisingly, Minister of State-Owned Enterprises Sugiharto denied the possible break down of Exxon and Pertamina negotiation. "I don't think so. The negotiation is underway. Legal drafting should be done line by line to prevent defects early on," he said.

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November 16, 2005 11:48 AM  

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