Under discussion: Natuna B-Alpha
Natuna D-Alpha back in spotlight
ExxonMobil has agreed to talks with the Indonesian government over the Natuna D-Alpha gas block after Jakarta said the operating contract it holds had expired, an ExxonMobil Indonesia official said today.
Last month Indonesian Oil Minister Purnomo Yusgiantoro said the government had terminated ExxonMobil's contract amid high extraction costs and a lack of buyers for the gas.
The US supermajor disputed this and said the contract allows for two more years for it and Indonesian state-run player Pertamina to satisfy conditions or proceed with development even if the terms for development of the field are not met by 8 January 2007.
"While Exxon Mobil still believes the current Natuna contract remains valid, Exxon Mobil has agreed to enter mutually beneficial discussions," Deva Rachman, an Exxon Mobil spokeswoman, told Reuters.
"We expect these discussions to occur over the next several months. We will continue to progress our technical and marketing activities during this time," she added.
The company has said it has made significant progress marketing Natuna gas to credible buyers.
Separately, state oil company Pertamina chief Ari Soemarno said it should be possible to resolve any disputes over the Natuna gas block. Pertamina has 24% stake in block, while Exxon has 76%.
"I think the contractor and the government can find solution on Natuna gas, considering current high oil price development," Soemarno told reporters.
"If the government unhappy with the current gas split then we can talk about how much the new split is," he said.
"However, the contractor must get enough benefit from the operation of Natuna gas," he said.
Indonesian oil watchdog, BPMigas, has said the government wanted better terms and conditions on Natuna gas. Vice President Jusuf Kalla said last month Indonesia will give ExxonMobil top priority to renegotiate a new operating contract for Natuna.
Natuna D-Alpha holds about 222 trillion cubic feet of gas, of which 46 Tcf is thought to be commercially recoverable, but the field contains about 70% carbon dioxide, making it expensive to develop and difficult to sell. Despite the difficulties developing the field, the move to end ExxonMobil's contract may cause concern among foreign investors about uncertainties of doing business in Indonesia, compounding worries over the legal system, labour and corruption.
Indonesia and ExxonMobil signed a basic agreement in 1995 covering an estimated $40 billion to be invested in the offshore gas project in the South China Sea.