Indonesia, ExxonMobil spar over Natuna D-Alpha

Feb. 7, 2008
ExxonMobil Corp. hopes to reach an agreement with Indonesia regarding its contract for the Natuna D-Alpha Block in Riau Province despite the reported breakdown of formal negotiations.

Eric Watkins
Senior Correspondent

LOS ANGELES, Feb. 7 -- ExxonMobil Corp. hopes to reach an agreement with Indonesia regarding its contract for the Natuna D-Alpha Block in Riau Province despite the reported breakdown of formal negotiations.

An ExxonMobil spokeswoman said: "Talks are ongoing, and we have a willingness to engage in further discussions on the contract with the government" for an equitable solution on the contract.

On Feb. 4, Kardya Warnika, chief of Indonesia's upstream oil and gas regulatory agency BP Migas, said negotiations had ended in deadlock on a number of important issues, while ExxonMobil refused comment.

ExxonMobil argues that the agreement with the government allowed for two contract extensions, each for a period of 2 years, after the contract expired in 2005. But Indonesia claims the contract could not be extended because ExxonMobil failed to submit plans to develop the block and commercialize its gas resources.

The Indonesian government has the power to renew the expired contract, while state-owned oil and gas company PT Pertamina has asked the government to give it a 50% stake in the block. It currently holds 24%. Under the contract, first agreed in 1985, ExxonMobil holds 76% of the Natuna Block.

Pertamina Pres. Ari H. Soemarno said the Natuna Block is commercially profitable, with a production cost of only about $4/MMbtu, while the selling price could be as high as $8/MMbtu.

Contact Eric Watkins at [email protected].