Exxon & farm out of Mandar & Surumana

Bisnis Indonesia reported today that ExxonMobil might farm out 20% participating interest in two blocks in Sulawesi---Mandar & Surumana---to Malaysia's Petronas Carigali. State-owned oil and gas company Pertamina also exercises the possibility to enter the race.  

ExxonMobil currently controls 100% participating interest in the blocks, off west Sulawesi. Exxon secured the Surumana PSC in September 2006, while Mandar in March 2007. BPMigas deputy chairman Ahmad Luthfi said Petronas and ExxonMobil are in intensive talks for the farm out deal.

Exxon failed to get significant reserves from the Rangkong-1 drilling well (dryhole), but expressed its commitment to proceed with the drilling of two other wells. Results from the second well drilled, Sultan, has yet to be known.

Petronas and ExxonMobil are long-time partners. Early this month, both companies signed production sharing contracts for further development of seven oil fields offshore Peninsular Malaysia namely Seligi, Guntong, Tapis, Semangkok, Irong Barat, Tabu, and Palas.

Exxon is also a partner for Pertamina in Cepu Block and Natuna D-Alpha. But the future of collaboration between the two companies in D-Alpha is pending government decision on the state-owned company's main partner. Exxon, Petronas, Shell, PTT, and StatOil are among oil majors mentioned as potential partners for Pertamina. 

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Wiranto joins anti-Exxon movement

General (ret) Wiranto, chairman of Hanura Party, has joined with an anti-ExxonMobil movement. He attended the seminar at parliament building hosted by the movement's leader Marwan Batubara who is close to Fuad Bawazier (former Soeharto's finance minister, now an executive at Wiranto's party).

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Aceh election aftermath

It's almost certain that former Free Aceh Movement (GAM) leader Irwandi Yusuf wins the historic election in Aceh. Another former GAM leader also leads the race for North Aceh Regent, home to major industries. What's next? What the new leader will do with the existing investments, including FDI like cement giant La Farge or oil giant ExxonMobil & ConocoPhilips, in the provice? Into what direction?

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Cepu-like scenario in Natuna D-Alpha?

Regional administrations in Central & East Java secured 10% participating interest in Cepu oil and gas project. Today, some newspapers quoted Riau Islands governor Ismeth Abdullah saying his administration would ask the same in the Natuna D-Alpha project to be renegotiated between Indonesia government & ExxonMobil/Pertamina. That would make the process even more interesting to watch.

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Off to China again, balancing act

President Susilo Bambang Yudhoyono (SBY) starts a five-day visit to China today, mainly to strengthen economic ties between the two countries, just weeks ahead of US president George Bush's visit to Jakarta and days after VP Jusuf Kalla visit US.

Last year, both the president and VP visited China. SBY also visited US last year. SBY will meet Chinese PM Hu Jintao, the fourth meeting between the two leaders. SBY will score the same amount of meetings with Bush next month. Balancing act, to take benefit from the competition between the superpowers, hopefully.
As reported today, the president is scheduled to witness the signing of cooperation agreements worth US$4.5 billion between Indonesia and Chinese companies in energy sector. No details available so far.
One thing, China energy giants such as CNOOC and Petrochina, have been agressively invested in Indonesia's oil and gas sector even though the scale of their operations are still insignificant compared to US giants such as Chevron or ExxonMobil.
I'm pretty sure, Bush will take with him these giants to Jakarta next month. Whatever, such competition, especially between US and China energy giants, should be good for the country.

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Chevron in Indonesia: A Wakeup Call (2)

I'm so glad to read an article written by Orin Basuki, reporter of Kompas, the largest newspaper in Indonesia, under the title...chasing the truth to San Ramon. The article is basically based on an audit report completed by Supreme Audit Agency (BPK) on PT Chevron Pacific Indonesia, a subsidiary of Chevron Corp, USA.

The article is centered on cost recovery, a term in oil and gas business in which contractors such as Chevron claim the costs to government/state.
BPK found the following irregularities at Chevron:
1) Caltex polytechnic Riau: Cost recovery claimed US$6.56 million. (So the education & training facility is not a donation of Chevron, it's a state-funded institution)
2) School cost: Cost recovery claimed US$6.29 million for 2004 & 2005. (Again, this is no corporate social responsibility/CSR, it's a state-sponsored)
3) Donation to international school: Cost recovery claimed US$5.94 million. (This isn't a CSR for God sake)
4) Community development & community relationship: Cost recovery claimed US$1.5 million and US$1.47 million respectively. (Not CSR, state-funded activity)
5) Interest recovery: US$4.97 million (this should not be charged as cost recovery item)
6) Modification of collecting stations US$33.98 million: No benefits for the operation.
7) Materials worth US$18.92 million, no gain, charged as cost recovery.
8) Electricity and steam supplied by PT Mandau Cipta Tenaga Nusantara have been doubted the fairness and would cost the government US$210 million and loss to the state at US$1.23 billion.
BPK auditors admit there should be a long list of items that deserved cost recovery, but government's position in most contracts is so weak that contractors tend to mark up cost recovery and charge everything in the mechanism. "Even they charged the cost to pay foreign teachers for expatriate's children or scholarship for children of local staffs. In the end, cost recovery is about the same with all the company's operational costs," Arief Handoko, BPK auditor told Kompas.
Worse, as explained by J Widodo Mumpuni, chief auditor on Chevron, government's position in the contracts is so weak that it coudn't blame contractors for the markups even though they put the country at huge financial losses.
This is what I mentioned in my previous article Chevron in Indonesia: A Wakeup Call.
I hope Kompas would continue the publication of other audit results over oil contractors such as ExxonMobil, ConocoPhillips, Petrochina, CNOOC, Medco Energi, Energi Mega Persada, Pacific Oil & Gas, Santos, Star Energy, Pertamina, Petronas, etc.
Not just that we're aware of how these contractors made lots of money from the country's resources, but we know how careless our government officers (including BP Migas) in performing their role as regulator and supervisor. With that, we know what we should fix right now.

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Flip Flop on Natuna D-Alpha

In less than one month, government officers made flip-flop and conflicting statements on the status of ExxonMobil & Pertamina's contract to develop the massive gas reserves called Natuna D-Alpha project.

Today, both energy minister Purnomo Yusgiantoro and BPMigas chairman Kardaya Warnika stated that the Natuna PSC had been automatically terminated in January 2005. Few weeks ago, both officers stated that give time to Exxon & Pertamina until January 2007. In between, both guys also stated that Exxon may still operate the gas block but with brand new contract.
On the other hand, ExxonMobil which controls 76% shares in Natuna D-Alpha (Pertamina 24%) insisted that the contract is valid until 2009. (FYI, Pertamina initially owned 50% shares in Natuna D-Alpha. But somehow Pertamina divested 26% few years ago, and nobody raised the question, why? I could understand if the divestment is considered a big mistake, especially with the sky-high energy price in recent years)
Anyway, back to the Natuna legal battle, it's clear that both parties have different interpretation of the contract itself. Article II.2.2 of Natuna PSC amended in 1995 stated that if contractors (Exxon & Natuna) failed to come up with clear commitment before January 2005, the contract shall automatically terminated. Exxon claimed that it's letter dated December 2004 to BPMigas confirming the commitment to develop Natuna has been enough to secure the first two year extension, which means until January 2007. Article II.2.3 also stated that if one of the parties (BPMigas or contractor) asking for extension after the first two year of extension to further confirm the project, it's deemed obliged to approve additional second two-year extension (until 2009).
Government claimed that the contract has not been terminated unilaterally, but automatically. It means, government should provide proofs that contractor (Exxon & Pertamina) failed to meet the requirements in the contract. So far, no such proofs available that legally convincing. But Kardaya seems to believe that government is in strong position even if Exxon challenge that in international arbitrary. People that familiar to oil & gas business doubt though. "It's gonna be the next Karaha Bodas," he said.
What if government think that Indonesia managed to postpone hundreds of million dollar fine of Karaha Bodas case? Well, let's read brand new flip-flop statements in the newspaper in the coming weeks or so.
But the first statements, maturity of contract in 2007, has completely different legal consequences, i.e. government acknowledging Exxon's commitment made in December 2004 and the 2-year extension accordingly. Meanwhile if government claim the contract had been terminated automatically in Jan 2005, it has to come up with proofs to support that and probably a stupid question: Why government said before that the contract would mature in Jan 07? Or another stupid question: What's happened in the last two years? Where are all these guys?
I try to take positive leasons out of this. Suppose that gas price stays the same like 5 years ago, nobody would care about Natuna D-Alpha, because it's just too costly to develop. Now that government want to renegotiate for better terms, that's good. But we have to do it right. Some people try to blame Soeharto or BJ Habibie for the contract given to Exxon. Partly true because we always forget to protect ourselves from future ups-and-downs in contracts with smarter guys. Meaning, we have to learn to be smart in negotiations, articles by articles, paragraph by paragraph, and word by word.

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Energy highlights

Below is the highlights of energy news published by Indonesian newspaper today.

Oil and Gas: Media reported 41 oil and gas contracts on the block, mainly onshore and offshore Sumatra, Kalimantan, Sulawesi & Java. The blocks are as follows:
Sulawesi: Madang, South Mandar, Sageri, South Sageri, Enrekang, Karama, Malunda, and Mandar.
Natuna: Tuna, Cucut, Dolphin, Cakalang, Baronang, & Kerapu.
Sumatra: West Air Komering, offshore Lampung I
Kalimantan: Southeast Mahakam, Tigau, Menatana.
Java: Ujung Kulon
Meanwhile, ExxonMobil Oil Indonesia discovered three oil and gas fields at Cepu Block. EMOI already identified five fields at Cepu block namely Kemuning, Alas Dara, Cendana, Banyu Urip, and Jambaran. Total estimated reserves are 600 million barrels of oil and 10 TCF of natural gas.
Synthetic fuel: Sugico Group and MOK Industries LLC (USA) announced a plan to build a coal-based synthetic fuel with US$800 million investment in South Sumatra. The plant is expected to start commercial production in 2011 using low rank coal as raw material with initial capacity of 20,000 bpd. I'll put a note on people behind this new project by afternoon.

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Indonesia's oil deficit US$3.57 billion, what to do?

Just two days before 109 talking heads file lawsuit against Indonesia government, ExxonMobil, and Pertamina protesting the oil rich Cepu project agreement, Central Bureau of Statistics (BPS) announced the first half performance of the country's international trading. Most journalists were impressed with strong export growth and run that as headlines. None paid attention on the country's oil deficit at record high of US$3.57 billion.

The deficit is clearly higher than US$3.3 billion in the same period last year despite government's effort to cut subsidy (and subsequently curb domestic consumption) with almost 100% price hike in October 2005. Months after the price hike, government claimed lower import on decreasing domestic consumption.
According to BPS, Indonesia exported US$5.38 billion worth of oil (crude & refined) in first half 2006, increased 15.7%, while import grew by 12.5% to US$8.95 billion. According to the agency, Indonesia is still in the position of net exporter of crude oil at US$200 million. But for refined products (gasoline, diesel, kerosene etc), Indonesia's deficit increased significantly by 19.5% to US$3.81 billion. Why?
Well, increasing world price for sure is the reason. But this is also because the country failed to boost refinery investment. No new refinery built in more than 10 years.
Efforts to promote investment in the sector managed to get some commitments. But none is materialized.
Read my previous posts for backgrounds:
1) Tax holiday for new refinery projects

2) Pertamina might ignore Sinopec

3)Iran to invest US$2 billion in refinery

4) Djoko Tjandra's big leap into oil refinery

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Saipem expand drilling services in Makassar

As more and more new oil and gas projects developed in Sulawesi Island, Saipem Indonesia---a subsidiary of Italy's Saipem SA, is expanding its drilling services to Makassar, South Sulawesi province.

PT Saipem Indonesia had secured investment approval from Investment Coordinating Board in March 2006 to invest US$20 million in Makassar for offshore drilling services.
The new investment would create 64 new jobs for Indonesian with revenue target of US$57 million per year.
Few days ago, ExxonMobil announced it's subsidiary Esso Exploration International Ltd had won exploration contract in Sarumana block, Makassar Strait.

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PDI-P: The lonely and powerless opposition

The humiliating defeat of anti-ExxonMobil movement in the House of Representatives have obviously confirmed PDI-P, the second largest party led by former president Megawati Soekarnoputri, as the lonely and powerless opposition to government's policies. The party's legislators felt betrayed by other parties, especially the Prosperous and Justice Party (PKS) and National Mandate Party (PAN).

Commenting on the defeat in Tuesday's voting (83 support the anti-Exxon, 257 against it), Taufik Kiemas, senior PDI-P politician and the husband of Megawati, said nothing the party could do except to face the reality that it lost the battle. "We can't win forever," he said. The problem, PDI-P has never won any battle since Megawati lost the presidential race in 2004 and proclaimed as an opposition party. In fact, the party lost almost all battles, including on fuel price hike late last year and rice import policy early this year.
Worse, the party, over and over, has been 'used' by other parties to leverage public image. The latest move to investigate government's policy awarding ExxonMobil the right to operate the giant Cepu oil and gas field was initially supported by PKS and PAN. Even some Golkar legislators (the largest party in the House) and from other parties such as PKB and PPP were among the supporters of the initiative.
But when it comes to final decision, the voting, it's clear that PDI-P was left alone. The party was the only solid force to endorse the investigation. PKS zero, PPP zero, PDS zero, Golkar zero,and PKB zero. PDI did get additional votes from PAN. But with 9 support and 20 against the initiative, it's a sad reality for PAN itself because Amien Rais (former chairman of PAN and former Assembly Speaker) is the key figure outside the parliament building who campaigned the anti-ExxonMobil movement. Besides PAN legislators such as Drajad Wibowo and Tjatur Sapto Edi were the most quoted spokespersons of the anti-ExxonMobil movement. These guys, including Amien, even failed to convince their colleagues in the party. How could they expect to convince people outside the party?
Compared to the voting on rice import policy where PDI-P got full support from PKS, in the anti-ExxonMovement PDI-P is lonely and powerless.
In such a situation, government should have been decisive enough in implementing policies. The problem, the current administration scored only few important decisions and pending most just because it care too much about the public image. That's the difference. A rubber-stamp legislative, just like during Soeharto years, is not a guarantee that we have a strong and decisive executive. It's depend on who's the man behind the gun!

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Morales Effect in Indonesia

Bolivia President Evo Morales stunned world's oil, gas, and mining establishments with his May Day decree. Under the decree, foreign companies in oil, gas, and mining must accept much tougher contract terms within six months or leave the country. Morales' nationalization does not entail a complete state takeover, as has occured in other countries. So far none of the big players, Petrobras, Repsol YPF, BG Group, or Total SA has pulled out. But as soon as they find the terms unprofitable, they will leave the country.

Morales Effect hit the neighboring countries, especially Brazil and Argentine, which rely their gas supply from Bolivia. As reported by The Wall Street Journal today, Morales decree drives metal prices even higher as he stated clearly that oil and gas nationalization is just the beginning and to be followed by other sectors including forestry.

Tanzania immediately follows Morales step with the announcement of the country's Chambers of Miners that government had set up a task force to review foreign mining contracts because the current terms benefit foreigners at the expense of locals.

The Latin American anti-establishment storm would even stronger if the nationalist presidential hopeful Ollanta Humala win the second-round runoff vote later this month. The controversial Venezuela president Hugo Chavez has threatened to nationalize mining industry as well.
Like his ideological soul mate and friend, President Hugo Chavez of Venezuela, Mr Morales is keen to diversify Bolivia's relations away from a dependence on the US. Historically, Bolivia's weak economy - the poorest in South America - has made it very vulnerable to US influence.
China, the energy hungry nation, is considered to play a role in developing Bolivia's oil and gas sector, as it is already doing in Venezuela.

How about Indonesia?

Actually the nationalist movement had mounted pressure to review the gold mining contract of PT Freeport Indonesia, the largest gold mining in the world, since late last year. President Susilo Bambang Yudhoyono had asked minister Purnomo Yusgiantoro to review the contract. The nationalist is also targetting ExxonMobil's contract with Pertamina regarding the development of Cepu oil and gas project.

Some legislators then proposed to use the rights to investigate government over its decision to give ExxonMobil the operation right in Cepu Block. But when it comes to formal politics, only one party (PDI-P) which endorsed it. Legislator from PKS and PAN failed to convince its party leadership to support the move. Recently media also reported the breakup in PDI-P over the issue. So the movement in parliament has been weakened in the last few months.

But outside the parliament building, former Assembly Speaker Amien Rais keep the fight. He gathered support from senior politicians such as Try Sutrisno (former VP) and retired general Wiranto. This group failed to get spare time of president SBY to deliver their 'messages' and planned a major rally on May 20 instead.

But yesterday Amien trumpetted Morales Effect saying, "Our leader (President SBY) should act like Morales."

I'm sure he has good intention, to get better deal with big corporations like Freeport McMoRan and ExxonMobil which book unbelievable profit in the last few years. I support every efforts to renegotiate better terms for the people. What we need now is how to outsmart them.

It is true that Freeport, Exxon, or Caltex booked huge profit from their Indonesian operation. But we have to remember that local groups such as those who own PT Bumi Resources Tbk also recorded US$3.2 billion out of its divestment of coal mining companies. Look at how much money Bumi made last year? Rp1.2 trillion profit. That's also the case with Adaro Indonesia, Energi Mega Persada, or Medco Energi---all owned by local business groups.

We can't simply copy paste Morales decree because we have to analyze its full impact to the society. One's misery could be other's fortune. Kicking out the Spanish or UK companies, would open the door for China. The same could happen here. Kicking out US companies would be followed with huge fortune for some Indonesian business groups, but not necessarily means Indonesian people. We managed to kick out Rio Tinto and BP from Kaltim Prima Coal, but then we have Bumi Resources control it and got US$3.2 billion out of it. So, what we need is an overall arrangement of the level of playing field, not partial ones.

Great philosopher Jeremy Bentham said the best public policy is that which produces greatest happiness. We can't change a public policy that would bring miseries. It is our job, including the leaders of opposition movement, to find out the best policy. We're not in a rush anyway!

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Medco confirmed Block A acquisition from Exxon

Listed energy company PT Medco Energi Internasional Tbk. (MedcoEnergi) confirmed my earlier report that it won the bidding to acquire ExxonMobil's 50% interest in Block A oil and gas in Aceh.

According to its letter to Jakarta Stock Exchange (JSX) today, Medco Energi through its wholly owned subsidiary, Medco Far East Limited, and its partners, Japan Petroleum Exploration Co, Ltd. (Japex), and Premier Oil Plc. (Premier), have signed a Share Sale Agreement (SSA) with ExxonMobil Block A Investment Limited (ExxonMobil) to purchase 100% shares of Mobil Block A Limited (MBAL), a wholly owned subsidiary of ExxonMobil. MBAL holds 50% of interests in Block A Production Sharing Contract (Block A PSC) located in Nanggroe Aceh Darussalam province.
Upon the completion, MedcoEnergi, Japex, and Premier will each hold 33-1/3% of shares in MBAL, respectively. The remaining 50% interests in the Block A PSC are held by ConocoPhillips Company.
MedcoEnergi and its partners will change the name of MBAL immediately and report the changes to The Indonesian Oil and Gas Implementing Body (BP MIGAS).
The Block A PSC is located in the province of Nanggroe Aceh Darussalam in northern tip of Sumatra island, approximately 45 kilometres west of the giant ExxonMobil-operated Arun gas field. The PSC term period is 30 years which will expire in August, 31, 2011.

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Medco wins Block A from Exxon

PT Medco Energi Internasional Tbk wins the open bidding to acquire 50 percent working interests in gas field Block A offshore East Aceh at the North Sumatra Basin from ExxonMobil.

PT Surya Energi Raya (SER), controlled by media mogul Surya Paloh---an Acehnese, was reportedly competing Medco in acquiring Exxon stakes, but failed to secure financing.

Medco president Hilmi Panigoro said last year that the comapny would invest US$100 million to develop Block A in Aceh should it win the tenders to buy the concession from ConocoPhillips and ExxonMobil. Conoco owns another half of the production sharing contract and acts as operator.

Block A has estimated reserves of 450 BCF, but the carbondioxide content is high that will make the development cost expensive. Medco estimated that the area would be able to produce some 100 million standard cubic feet per day (mmscfd) at peak production.

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Military to pull out of Freeport mine

Koran Tempo reported today that Indonesian military will withdraw its troops from Freeport's mining operation in Papua.Quoting National Police Chief General Sutanto, the newspaper reported that police mobile brigade (Brimob) would replace the military (TNI) gradually in protecting the mining operation.

Military Headquarter admitted the withdrawal should have started early this month. There are 500 to 600 military personels protecting the mine.

Hopefully this time the military deliver its promises. Three years ago, military also said it wants to withdraw troops guarding the country's bigges mining.

The withdrawal of military guards from 'vital projects' has been a major demand of human rights defenders in both West Papua and Aceh. In Aceh military officers guard the natural gas installations of the giant US oil corporation, ExxonMobil. Their presence has been linked to a series of gross human rights abuses which form the basis of a court case in the US, filed by the International Labor Rights Fund.

In West Papua, communities and NGOs concerned about the developments at Freeport and at BP's huge Tangguh gas and gas processing project planned for Bintuni Bay, will be watching closely to see whether Endriartono really means what he says.
Military withdrawal would not mean that the notorious police mobile brigade (Brimob) would also give up their lucrative security deals to guard company facilities. In fact, as reported by Koran Tempo today, their presence would be even more significant in the mining operations.

Military protection on Freeport became major topic late last year when The New York Times published its investigation over payments made by Freeport Indonesia to senior military officers.

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Anti-Exxon protest to repeat Abepura?

Anti-Freeport protest in Abepura, Papua had cost four lives (three police and air force officers) last week. Today thousands of people from Solo, Central Java marched to Bojonegoro, East Java to protest ExxonMobil's control over the giant Cepu oil gas field.
The planned Anti-Exxon protest might repeat the Abepura bloody clash as Bojonegoro youngsters are planning to block the hundreds of protesters from moving into the oil block.
As reported by Detik.com, Bojonegoro youngsters plans to cut down trees to block the roads into the area. Police seems aware of the possible clash so they blocked the protesters in Boyolali instead. Police asked protesters to cancel their plan to enter Bojonegoro regency. Bojonegoro police deploys 1,000 personels to block the protesters at the border of Bojonegoro and Blora regencies.
It's an interesting situation as Bojonegoro defend Exxon's operatorship of Cepu block, while those protesters are mainly from Solo area in Central Java.
They argued that they're fighting for the sake of nationalism, Detik.com reported. While Bojonegoro residents rejects such claim saying they're tired of poverty. "Please don't make this a political issue. We're just want to have a better life," said Parnani, a Bojonegoro resident.
While Bojonegoro residents are moving on with their activities, some fears of clash between protesters and local youngsters. That's why an English course and computer center established by Garis Tepi (NGO) and ExxonMobil in Kalitidu sub-regency, Bojonegoro, decided to close down their operation for a while.

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Amien Rais, Too Late the Hero

Former Assembly Speaker Amien Rais is the most active politician in the last few months, at least from public appearance.
Media love his 'harsh statements', such as...Freeport committed three major crimes...Don't be afraid of America, just close down Freeport operation...or illogical things such as...Freeport could resume operation as long as it could bring back the mountains...
I am 100% believe that Freeport committed wrongdoings, but I'm 100% sure our leaders (military and civilian) had contributed something in those problems. At the end of the tunnel, I believe also that someone would take benefits or losses out of this debacle.
Amien then jumped on the wagon of opposition towards government on Cepu settlement, in which both ExxonMobil and Pertamina agreed to have ExxonMobil as the operator of the block. He expressed his anger and uncrontrolled emotion with brand new accusation...I'm sorry to say that this administration has been involved in major corruption scandal...or...I don't know who the hell whispered them (government) to make this decision...
To make the case, Amien need friends. So he met former vice president Try Sutrisno Thursday night. DPD member Marwan Batubara, legislator Alvin Lie and Drajad Wibowo, and ICMI Chairwoman Marwah Daud Ibrahim were by his side. Amien said he can't sleep well since ExxonMobil won the operatorship.
But Amien was not lucky. Try's friends, former presidents Abdurrahman Wahid and Megawati Soekarnoputri, and former House Speaker Akbar Tanjung were not there. Wahid, Try, Megawati, Wiranto, and Akbar get together quite often in the last few months, but Amien was not member of the group. So, they must thought like this...why Amien need us now while he never show up whenever we sit down and criticize government on various issues in the past? Or, OK, so he need us when he has agenda?
I have to say, Amien is too late the hero in Cepu debacle. He was the Assembly Speaker when Pertamina approved the acquisition of Humpuss remaining shares in Cepu block back in June 2001. That was the critical moment of truth for the Exxon to get 100% control over Cepu block. Where was Amien then?
Another critical moment is when government-sanctioned negotiations team signed the memorandum of understanding with ExxonMobil in June 2005. Based on the MoU, government then awarded the cooperation contract (KKS) in September 2005 in which government agreed upon 85% revenue split from Cepu, and 15% for contractors. Government also agreed that the contractor shareholding at 45% for Pertamina, 45% for ExxonMobil, and 10% for local administrations.
Did you ever read Amien's opposition to this agreement? Operatorship agreement, signed yesterday, actually the derivative of the KKS, technical issue that less significant than the KKS. Amien justify his accusations based on the JOA.
Well, Amien apparently is too late to learn the facts and just too fast to judge, accuse, and talk. Amien should do his homework, to learn more to be a wise man. Otherwise, he is just a horse for those who are smart enough to ride on him.

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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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Petronas-Exxon-Pertamina: Lessons learned

While some Indonesians, especially political pundits, bussy to reject ExxonMobil as the operator of the giant Cepu oil field, Malaysia's Petronas quitely opens its first gas station in Cibubur, near Jakarta. Petronas is the second multinational to open gas station in Indonesia after Shell, the super major along with ExxonMobil and Beyond Petroleum (BP).

We, Indonesians, are always jealous with Petronas. Those who loves Formula One easily noticed Petronas in one of the only 11 teams competing in the racing. Their existence would significantly be boosted with their recently announced plan to be the largest player in retail market of fuels in Indonesia.

Petronas used to learn from Pertamina, Indonesia's state-owned company. The Malaysian even adopted the production sharing contract (PSC) system in oil and gas business. They modified that, off course. In less than two decades, Petronas emerged as one of the largest companies in the oil and gas business. It has ventured into various countries, become a global oil and gas player.

What's wrong with Pertamina? Why Petronas managed to surpass Pertamina in almost every aspects of the business? A simple comparison: Pertamina booked net profit of around US$1.3 billion last year, while Petronas 10 times Pertamina's. Pertamina's oil production was 140,000 barrel per day, while Petronas at 567,000 barrel per day.

Can we learn something from Petronas?

Partnership. No way that Petronas could become a world player without partnership with other global players such as Chevron, Mitsubishi, ExxonMobil or BP.

Under production-sharing contracts, ExxonMobil's 600 wells account for about half of Malaysia's oil production and two-thirds of Peninsular Malaysia's natural gas production. Petronas Carigali Sdn. Bhd., a subsidiary of Petronas, is a co-venturer in all but two of the 11 fields operated by ExxonMobil.

ExxonMobil Exploration and Production Malaysia Inc., (formerly known as Esso Production Malaysia Inc), is the largest oil producer in Malaysia and largest supplier of gas to Peninsular Malaysia, producing approximately 280 thousand barrels of oil and 1.4 billion cubic feet of gas per day.

Building on experience, Petronas has extended its reach by forming ventures with ExxonMobil and other multinationals to explore for oil and gas in Africa, the Middle East and Central Asia. The highlight is the Petronas and ExxonMobil membership in the $3.5 billion Chad Project (ExxonMobil interest, 40 percent; Petronas 35 percent; and Chevron, 25 percent).

Petronas is also a 15 percent interest holder in ExxonMobil's Block 24 offshore Angola and Block 214 offshore Nigeria.

Suprisingly, those who oppose ExxonMobil and insist to have Pertamina as the leader in Cepu project, tend to use Petronas as the role model of nationalism in developing the country's natural resources. I'm afraid these guys use the wrong model or they just don't want to read or just to make the case against government.

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Condi's visit in Indonesia: Day One, no metal detector please!

What a hectic day for US Secretary of State Condoleeza Rice. She arrived at Jakarta's Halim Perdana Kusuma airport (not the Soekarno Hatta International Airport, I guess because of security concerns, as few days ago the airport received bomb threats) around 1PM.

She went on straight to an Islamic boarding school (Madrasah Al-Makmuriyah) in Jakarta, where she announced the plan to produce Sesame Street Indonesian version with US funds of US$8.5 million. Oops, Mrs Rice didn't aware that the school also teach its students mathematics and science. Outside the school compound, some people waged a protest on US policies.

The prelude of a lunch at Foreign Affairs Ministry's Office tells an interesting story when the cameraman from MetroTV Eko Widodo admitted that one of US military officers guarding Mrs Rice reportedly threatened to shoot him when he tried to take the picture. It was Indonesian military officer who warned Widodo that if he keeps focusing the camera to the US officer, "the US military officer will shoot you."

After the meeting, Mrs Rice told the press that Indonesia and the United States have agreed to enhance military cooperation, among other things through the international military education and training (IMET) program.

The US State Secretary also said like cooperation in the economic, health and educational fields, military cooperation was one way to enhance the two countries` bilateral relations which had been in lexistence for a long time.

Rice hoped US cooperation with Indonesia in many fields could be further improved as Indonesia was playing a significant role in the world as a country where harmnious inter-religious, inter-ethnic and inter-racial life was well-maintained.

Condi also expressed hope that Indonesia`s role in representing moderate Islam could be further increased so as to make a valuable contribution to the settlement of conflicts in the world.

She then paid a courtesy call to president Susilo Bambang Yudhoyono. She arrived at the State Place at 3.45PM and didn't have to pass the metal detector routine like anybody entering the president's office. The president raised the concern on deadlock of peace process in Korean peninsula. Outside the palace, 600 protesters from an Islamic organization shouts anti-US slogans. "Sharon = Dead, Slobodan = Dead, Bush = In the process", the banners said. Or simply, "Go to hell Condoleeza Rice."

Mrs Rice then meet economic ministers led by coordinating minister for the economy Dr Boediono. The meeting didn't discuss specific issues such as Freeport or ExxonMobil, Dr Boediono told the press. They're only discussing macro issues. Indonesia, as Dr Boediono said, expects US government's help in luring in US companies' investment to the country.

The US assistance to Indonesia in the Fiscal Year 2006 include:
Education: $31.9 million, Health & Water: $33.3 million, Democracy: $36.3 million, Economic Growth: $21.9 million, Environment: $6.9 million, Tsunami reconstruction: $400 million, Avian Influenza: $11 million, and Peace in Aceh: $11 million.

But Health Minister said US is yet to disburse the promised funds to help the country cope with avian influenza that already killed 22 people.

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