Cabinet failed to make decision on Cepu
A cabinet meeting led by president Susilo Bambang Yudhoyono failed to make a final decision on who should operate the giant Cepu oil field amid stronger pressure from DPR to appoint state-owned Pertamina.
The meeting was started 2PM. Vice President Jusuf Kalla, Coordinating minister for the economy Boediono, finance minister Sri Mulyani, energy minister Purnomo Yusgiantoro, state-owned enterprises minister Sugiharto, and cabinet secretary Sudi Silalahi attended the three-hour meeting.
Sugiharto told the press after the meeting that no decision was made pending a final draft of the joint operating agreement (JOA) between Pertamina and ExxonMobi, Detik.com reported.
"No decision yet. But it's almost done. We're fighting for Pertamina as the chairman of the joint operating committee (JOC)," Sugiharto said.
He admits that the committee would consist six members, three from Exxon and three from Pertamina. The committee will govern the operation of Cepu block including plan of development and budget.
While some DPR members leaning toward Pertamina, the House Speaker Agung Laksono said DPR has no problem if government appoints ExxonMobil as the operator.
Labels: ExxonMobil, Pertamina, Purnomo Yusgiantoro, Sri Mulyani, Sugiharto
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posted by yosef at 5:50 PM
9 Comments:
I humbly believe that the government is treading carefully on this Cepu matter, and I humbly believe that by doing so, the government is showing to the world that it is capable of acting prudently. A matter that begun in a business realm should be allowed to be completed on a business-to-business basis to ensure a finish with which all parties can live with, I humbly believe...
I hope that's the case and that's just for good reasons.
I do hope that this " all parties " would include the people of Indonesia, as with most gov negotiations, all these times, foreigner gets the benefits, having paid under table sums to both parliament and god knows who else..
The contract signed last year between govt and contractors actually not that bad. Govt split would be 85%, contractors 15%. Out of the contractor split, Exxon would get 6.75% something. All in all, Indonesian side would get 93.25%. If you compare to govt contract with Caltex (Chevron), Indonesian side gets only 70%. Caltex produces 400,000 barrel per day, while Cepu would only be 170,000 bpd. Even the split in Pertamina's JOB (mainly operated by foreign companies like PetroChina), govt gets only 60%.
But again, i'm afraid that nationalism is not about math calculations, right?
Besides, even if we could kick Exxon out of Cepu, companies like PetroChina will knock on Pertamina's door. Remember when we kicked out BP and Rio Tinto from KPC, it's CSFB and Merrill Lynch who get the most ouf of it.
Yosef, would you like to do many of us a big favour and explain briefly and in simple terms how oil production operates? e.g. In Cepu, who owns the oil? how owns the land above the oil? who extracts the oil? on what basis do the central and local governments obtain revenue from the oil? I only raise the question because it is hard for me to believe exxon only gets 6% of the value of the oil they extract??
The state owns the oil, by law, just like in other countries. People who happens to live in a land over the oil only gets compensation based on the price in the property market.
The state then appoints contractors (Pertamina,Exxon etc). The contractors provides funding, build the facilities, drill the oil etc, all of these costs would be recovered by the state. Total investment for Cepu is expected to be US$2.5 billion.
Off course the oil drilled would then be sold to customers (mainly refineries) both domestic or overseas. Those who handle the marketing off course will make money out of it.
The proceeds, according to the contract, 85% for government, 15% for contractors. Out of the government proceeds, according to autonomy law and balance budget between central and local government, 85% goes to central government, 15% to regional administrations (6% for oil producing regency administrations, 6% to non-oil producing administrations in the same province, and 3% goes to provincial admnistrations). That's how it works.
On the contractors proceed (15% of the total), 6.75% goes to Exxon, 6.75% to Pertamina, and 1.5% to a company established by local administration.
Off course the 6.75% of Exxon's portion is net proceed (profit if you want), the same for Pertamina, because these guys could recover all their expenses. Now you see, even though it's look small (6.75%), it's a huge profit still. If total proceeds for one year of production is US$3 billion, Exxon will get net profit of almost US$200 million. That's not small amount. Pertamina will also get the same US$200 million, net profit.
But on top of oil, Cepu has huge natural gas reserves as well. If the value of natural gas exploitation would be the same with oil, just calculate yourself how much Exxon & Pertamina will get out of Cepu.
Thank u very much - u are a tireless writer it seems.
But further, I wonder why one of the main issues is that pertamina says it can do the job much cheaper than Exxon. If we assume this is true, then it means that like in all businesses there will be more profit (less costs) and thus a higher proceeds as u call it for the contractor (Pertamina say) and for the country too. But in fact, if Exxon is so "expensive" would it make a significant monetary difference to all parties, or is there a sense that Pertamina is just grumpy that someone else is going to get the contract, and that a whole lot of their staff will get less chance at big bikkies, in a corrupt or non-corrupt way??
Mr Snag,
I'm not sure that I could make such a comparison between Pertamina and Exxon costs. Because out of Pertamina's total production of 140,000 barrel per day, only 40,000 bpd that company really produe by itself while the bigger chunk of 100,000 bpd by big guys like PetroChina or Medco.
But I'm sure Exxon's costs will be higher (expats normally paid lot higher than locals, right). That's also the case with Chevron with 500,000 bpd in Riau or huge gas operations in Kalimantan of which none operated by Pertamina.
Exxon's neighbor in Cepu, PetroChina operates the oilfield of Pertamina. This company had lobbied for so long to get the giant Cepu oilfield. I think that there is a geopolitical context that should be taken into account here. It's between US & China.
Don't get me wrong. I don't like jingoistic nationalism and multinationalism. It's an irony that government announced the new investment policies to lure in more foreign investors, but at the same time squeezing investors thereby find their exit such as Cemex (or maybe Exxon). I try to put the Cepu dispute in a context and make some comparison.
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