GOVT ENDS EXXON'S RIGHT TO DEVELOP NATUNA GAS BLOCK

By Andi Abdussalam

Jakarta, Jan 17 (ANTARA) - The Indonesian government has urged Petamina to develop Natuna D-Alpha Block soon, assuring the state-owned firm that the American ExxonMobil Oil Indonesia's contract for exploitation of the gas field has expired.

        Energy and Mineral Resources Minister Purnomo Yusgiantoro said that Pertamina might develop soon Natuna D-Alpha block which was estimated to hold around 222 trillion cubic feet of gas reserves.

        "There is no need for Pertamina to cast doubt on the exploitation right of the gas field," the minister said on Friday about the controversy over the right to develop the huge oil block of Natuna D-Alpha in Riau Islands province.

        A limited cabinet meeting chaired by President Susilo Bambang Yudhoyono on Friday asked Pertamina to carry out a feasibility study on the exploitation of Natuna gas field. "So, Pertamina should not be hesitant any longer," the minister added.

        Controversy continues over the right to develop the huge oil block of Natuna D-Alpha in Riau with old contractor ExxonMobil saying it still owns the block.

        Indonesia terminated the contract with Exxon on Natuna D-Alpha block in 2005 because after the contract had run for 20 years the American company was still unable to bring the field to a productive stage.

        The Indonesian government took the decision after negotiations with ExxonMobil failed. Talks with ExxonMobil have stopped on the offshore gas project - estimated to need total investment of about US$40 billion - due to disagreements on how to split gas output.

        Under the old contract, ExxonMobil controlled 76 percent of the shares and Pertamina the remaining 24 percent but the production sharing ratio was unfair as Exxon enjoyed 100 percent and the government zero percent.

        The Natuna D-Alpha block holds around 222 trillion cubic feet of gas reserves, of which about 46 Tcf are thought to be commercially recoverable.

        Yugiantoro said that the contract between the Indonesian government and ExxonMobil has expired on January 9, 2009. Based on the contract, ExxonMobil was required to submit a plan of commitment to continue the development of the Natuna gas field before January 9, 2005. It should enclose a feasibility study as a basis for commercial viability considerations between BP Migas (Upstream Oil and Gas Regulating Body) and ExxonMobil.

        Yusgiantoro said ExxonMobil had submitted a letter of commitment before January 9, 2005 but it did not enclose a feasibility study as a condition to obtain the commercial viability status.

        ExxonMobil however claims its contract on Natuna is still effective. ExxonMobil's vice director Maman Budiman said his side held that the Exxon's contract on Natuna was still effective. Exxon remained committed to develop Natuna efficiently along with Pertamina as stated in the written contract.

        ExxonMobil said it had submitted a plan of development (POD) on December 30 in 2008 before its contract expired on January 9 this year. Based on the production sharing contract the PoD is to be submitted before the deadline of development as a commitment of Exxon Mobil for Natuna development, its vice president Maman Budiman said last week.

        Chief of BP Migas Raden Priyono, however, said he knew nothing about the PoD, adding that the contract of ExxonMobil was already terminated.

        Earlier the government said the contract of the U.S. company had already expired in 2005 and was not renewed as ExxonMobil failed to honor its contract after a renewal made earlier.

        On Friday, the Indonesian government threatened it would file a lawsuit against ExxonMobil if it failed to return all data on Natuna D-Alpha Block development.

        Yusgiantoro said under Law Number 22 of 2001 on Oil and Gas, the results of an exploration and exploitation belong to the government. "So contractors including Exxon may be brought to justice if they fail to submit the data to the government. If Exxon is not serious, I will sue it," he said.

        Regarding the possibility of Exxon seeking arbitration , Purnomo said the government had a strong basis, namely the contract that automatically expired when commercial viability was non-existent.

        Based on the contract, commitment to conduct field development would only be acceptable if BP Migas and contractor jointly agreed to develop economical fields based on a feasibility study. "So, as commercial viability is non-existent the contract automatically expires on January 9, 2005," he said.

        Thus, the government had since last year asked Pertamina to make a feasibility study and submit a proposal on the development of the gas field. The state-owned company has already taken steps including selecting a partner to develop the block.

        It said it would partner with other companies in developing Natuna gas field because the project needed a high technology and a big investment.

        Foreign companies which have expressed interest in Natuna include Total, PetroChina International, Royal Dutch Shell, Start Oil, Petronas, PTT Thailand and PetroVietnam. (T.A014/A/HAJM/A/O001) 17-01-2009 19:51:27