Block deal

Jakarta, Sept. 14 (Reuters): Indonesian state oil firm Pertamina and US oil giant Exxon Mobil Corp plan to sign a long-awaited deal on developing the Cepu oil block this week, the government said today.

The government had said it wanted to seal the $2-billion deal by September 25, closing a four-year saga that has clouded the future of the project, which has up to half-a-billion barrels of reserves that could add 180,000 barrels per day (bpd) to Indonesia’s declining output.

“The contract signing between Pertamina and Exxon over Cepu block is planned this week,” state secretary Yusril Ihza Mahendra said.

“The contract will be for 30 years to exploit oil in Cepu. Pertamina and Exxon will share the block 45 per cent each and 10 per cent is planned for the regional government,” Mahendra said.

“The president (Susilo Bambang Yudhoyono) will keep the 10 per cent share before handing it over to the regional government because there are some issues that still need to be resolved,” Mahendra added.

To accommodate the deal with Exxon Mobil, Indonesia has revised its upstream oil and gas regulations, under which the government could give exemptions on rules governing the state’s participating interest, investment recovery and contract period, mines and energy minister Purnomo Yusgiantoro said on Tuesday.

Jakarta is facing a steady decline in production, a widening budget deficit and a weakening currency due to rising oil imports.

Indonesia, Asia Pacific’s sole OPEC member, said in June it reached a tentative deal with Exxon on Cepu’s development. But state oil firm Pertamina has since then been seeking better terms.

Pertamina owns the Cepu block, but under the tentative deal Exxon Mobil is set to be the operator.

It was not clear whether the government would go ahead with a planned reshuffle of Pertamina’s board of directors before this week’s signing. The government had said it would reshuffle the board because of poor performance.