Indonesia rejects ExxonMobil’s claim to Natuna D-Alpha

Feb. 2, 2009
Indonesia has rejected a plan of development for the Natuna D-Alpha block filed last week by ExxonMobil Corp., saying the firm’s contract expired in 2005.

Indonesia has rejected a plan of development for the Natuna D-Alpha block filed last week by ExxonMobil Corp., saying the firm’s contract expired in 2005.

“Upstream oil and gas regulator BPMigas has sent an official letter rejecting ExxonMobil’s [plan of development] on Jan. 14,” said Energy and Mineral Resources Minister Purnomo Yusgiantoro.

“Every year ExxonMobil’s submitted its working budget and program for Natuna, but we never processed them, as the company’s contract (for the block) has been expired since 2005,” Purnomo said.

Purnomo said that ExxonMobil’s contract was automatically terminated when the firm failed to submit a feasibility study before the Jan. 9, 2005, deadline.

Under its contract, Purnomo said, ExxonMobil was required by that date to submit a plan of commitment to continue development of Natuna field and the feasibility study as a basis for commercial viability considerations between BPMigas and ExxonMobil.

However, Purnomo said ExxonMobil submitted only the letter of commitment before the deadline date.

The government’s decision not to extend the 2005 contract also is based on its view that ExxonMobil failed to seriously develop the block—an accusation denied by the firm, which claims to have invested $400 million in the block.

Jakarta not worried

Indonesia also seems to be shrugging off the possibility that ExxonMobil would bring the case before the international arbitration court.

“Anybody can file arbitration, but in this case ExxonMobil has no legal basis to do so,” said Alan Frederik, who heads the BPMigas legal division. “The deadline was not fulfilled, so the contract was terminated automatically.”

ExxonMobil spokesman Maman Budiman said the company respectfully disagrees with the government.

“We remain interested in a resolution which allows development of this resource to proceed with the support from the government,” Budiman said, adding, “ExxonMobil is uniquely positioned to develop this project efficiently in partnership with [state-owned PT] Pertamina.”

In a cabinet meeting last year, the government appointed Pertamina to take over the block and to seek partners to help develop it.

However, Pertamina hesitated to undertake the work, saying it was unsure of the field’s legal status and that it had no access to the block’s exploration data.

Considerable uncertainty seems to prevail over the location of the data.

“As a partner, Pertamina is supposed to have the data,” said BPMigas Chairman Raden Priyono. “I think the problem is with Pertamina’s data management.” However, a report in the local Investor Daily newspaper last week cited an executive of ExxonMobil Oil Indonesia as saying the firm will not hand over the data on Natuna D-Alpha until the termination of its contract, which it claims will be effective for the next 30 years.

Lawsuit threatened

In response, Indonesia Jan. 16 threatened to sue ExxonMobil if it fails to return all data on the Natuna D-Alpha Block development.

Citing Law No. 22 of 2001 on Oil and Gas, Purnomo said the results of an exploration and exploitation program 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.

Meanwhile, also on Jan. 16, a limited cabinet meeting chaired by Indonesian President Susilo Bambang Yudhoyono asked Pertamina to conduct a feasibility study on the exploitation of Natuna D-Alpha gas field.

“So, Pertamina should not be hesitant any longer,” Purnomo said, adding, “There is no need for Pertamina to cast doubt on the exploitation right of the gas field.”