ExxonMobil Natuna D-Alpha contract 'void,' says Indonesia

Indonesian officials, apparently shrugging off recent developments, have declared ExxonMobil's contract for the Natuna D-Alpha natural gas block void for the past 4 years.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Jan. 12 -- Indonesian officials, apparently shrugging off recent developments, have declared ExxonMobil Corp.'s contract for the Natuna D-Alpha natural gas block void for the past 4 years.

"The contract has been void since 2005," said Purnomo Yusgiantoro, Indonesia's minister of mines and energy. "We tried to negotiate with them, but the process was at a deadlock."

R. Priyono, head of BPMigas, Indonesia's upstream oil and gas regulatory agency, said, "They failed to fulfill their commitment to develop the block. That made the 2005 contract null and void."

However, according to ExxonMobil spokesman Maman Budiman, the production sharing-contract remains "in full force" as the company submitted its plan of development, or POD, for the block in December ahead of the Jan. 9, 2009, deadline.

Purnomo said the government would give its official response to ExxonMobil's POD at a press conference on Jan. 13.

The government reportedly remains undecided over the contract extension of for ExxonMobil with state-owned PT Pertamina voicing its interest to partner with the US firm.

On Jan. 9, Evita H. Legowo, the ministry's director general for oil and gas said the government had made no decision over the issue and over ExxonMobil's POD assessment.

The government's stance is likely to be decided by President Susilo Bambang Yudhoyono as it is considered sensitive to relations between Indonesia and the US, and because it leaves Pertamina in limbo until a decision is made.

Meanwhile, speculation is said to be "rife" that the government's reluctance to decide the status of ExxonMobil in Natuna is due to concerns over having to wage a lengthy battle with ExxonMobil—much like the battle it fought over operating rights for the Cepu block, which took 4 years to settle.

According to state media, termination of the ExxonMobil contract would also put Indonesia at risk of being brought before an international arbitration court, adding to delays and costs.

Contact Eric Watkins at hippalus@yahoo.com.

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