Exxon Mobil still expects to manage Indonesia`s Natuna gas block

Jakarta (ANTARA News) - Exxon Mobil Corp said it still expects to manage the Natuna D-Alpha gas block in partnership with Indonesia's state oil company PT Pertamina, an official said Thursday.

On February 19, the Indonesian government asked Pertamina to replace Exxon as manager of the Natuna block after talks to retain Exxon's contract were halted without the issue having been resolved.

Exxon Mobil holds a 76 percent interest in the block while Pertamina owns the rest.

Indonesia terminated Exxon's contract in 2006 on the grounds that Exxon had failed to begin development on the block after 20 years.

Exxon Mobil has argued that the basic agreement allowed for two contract extensions, each for a period of two years. So when the contract expired in 2005, it still had two extensions available to it.

BP Migas, the regulator for the upstream oil and gas business in Indonesia, ceased negotiations with Exxon earlier this month after the parties failed to reach an agreement that would allow Exxon to manage the block.

Deva Rachman, spokeswoman for Exxon Mobil Oil Indonesia Inc, said Exxon recently received a letter from the Indonesian government regarding the Natuna block and it is currently evaluating the content of that letter.

Rachman declined to say what the contents of the letter were.

She said Exxon Mobil remains committed to progressing the development of the Natuna resource and maximizing its value in partnership with Pertamina and the Government of Indonesia.

"We have been in discussions with the government within the framework of the Natuna production sharing contract (PSC) and believe these are appropriate structures that would advance the project in a manner that is satisfactory to all parties."

"ExxonMobil is uniquely positioned to develop this project quickly and efficiently in partnership with Pertamina and will bring our unique technologies, proven large-scale project execution capability, and production experience with complex gas projects similar to Natuna," she was quoted by Thomson Financial as saying in a statement.

Separately, Alan Frederick Pangaribuan, head of the legal division at BP Migas, said the government is seeking the help of local and foreign lawyers to defend it in the event Exxon takes the dispute to international arbitration in London.

"They (Exxon) insist that the contract has not expired. So, clearly, we have different opinions," Pangaribuan said.

"Our position is that the contract was automatically terminated in 2005 when there was no commercialization of the project. So it was terminated by (the) contract (itself), by its own terms. Why would Exxon still hold a contract?" he said.

The government has estimated it may require an investment of up to 30 billion dollars to develop the Natuna D-Alpha block, which is located off the west coast of Borneo.