Exxon & Pertamina finally sign Cepu deal

US giant ExxonMobil Corporation and state-owned oil and gas company PT Pertamina finally signed the joint operation agreement (JOA) to develop the oil-and-gas-rich Cepu block with investment costs of US$2.5 billion on Wednesday (March 15) amid criticism and opposition towards Exxon.

Under the JOA, both companies---which has 45% shares respectively in the block---agreed to establish Cepu Operation Organization which consists of a joint operating committee (JOC) that supervise the general manager/operator of the block. Exxon will be the operator of the block.

Pertamina will be the chairman of JOC with representatives from Pertamina, ExxonMobil, and a company to be established by local administrations with voting rights of 45%, 45%, and 10% respectively. The JOC will make important decisions such as plan of development and budget. All decisions needs pass mark of 60% voting rights. With that, no decision could be taken without approval of both Exxon and Pertamina.

The preparation and construction of the project, located in Central Java and East Java provinces, would take 31 months. The first oil drop will be sometimes in September 2008. Peak production is expected at 170,000 barrel per day.

Oil reserves are expected at 600 million barrels, some even put above 1 billion barrels. Meanwhile gas reserves are estimated at 1.7 trillion cubic feet.

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