Exxon, Pertamina seek ways for early production at Cepu block

Ika Krismantari, The Jakarta Post, Jakarta

ExxonMobil Oil Indonesia and its partner, state-owned oil and gas company Pertamina, are seeking a way to meet the government's request to begin oil production at the Cepu oil and gas block by the end of 2008, or two years ahead of the initial schedule, an executive of the American oil giant says.

Peter J. Coleman, the president director of a local unit of the United States-based ExxonMobil Corp, said here Monday that Exxon and Pertamina were still discussing with the country's Upstream Oil and Gas Regulatory Agency BPMigas and the government's oil and gas research and development center Lemigas to find a possible solution in order to meet the government's target.

The government and the operators have been at odds regarding the timetable for the commercial production at the Cepu block. The government has been urging the operators to speed up exploration activities, so it can start producing by the end of 2008, in order to support the government's plan of increasing the country's oil production by 30 percent to 1.3 million barrels of oil per day (bopd) by 2009 from the current 1 million bopd.

However,"social and technical problems" have prevented the operators from meeting the government's target, BPMigas deputy chairman Trijana Kartoatmodjo said in December.

With the land acquisition problems, Exxon and Pertamina said that the commercial production could be carried in 2010.

Beside social issues, Exxon is also facing technical difficulties that are preventing it from commencing production in Cepu on schedule.

Coleman said that he understood why the government asked Cepu oil production to begin either by the end 2008 or by early 2009. But he said that the government should also assess whether it would be economically viable for the early production, given such social and technical problems.

In February, the government offered Exxon and Pertamina a "fast track" arrangement, under which the government would provide assistance with the land acquisition process, which has been hindering the development of the US$2.6 billion project.

Cepu, located at the border of East Java and Central Java, contains an estimated 600 million barrels of oil and 1.7 trillion cubic feet of gas.

The block is expected to produce 25,000 barrels of oil a day when it starts a production. The figure could increase to some 165,000 barrels a day.