Indonesia wants bigger slice of ExxonMobil's East Java discoveries

ExxonMobil Corp. faces a large dilution of its interest in the Cepu block of east-central Java, where the company made two significant oil discoveries in 2001.

By OGJ editors

HOUSTON, Oct. 4 -- ExxonMobil Corp. faces a large dilution of its interest in the Cepu block of east-central Java, where the company made two significant oil discoveries in 2001.

Indonesia's state Pertamina said it might offer ExxonMobil a 50-50 joint venture on Cepu rather than extend the technical assistance contract in which the company's interest is 90%. The TAC expires in 2010.

ExxonMobil revealed in mid-April 2001 that more than 250 million bbl of oil would be recoverable at its Banyu Urip-3 discovery. The company made a second discovery, at the Sukowati prospect on the eastern part of the block, that flowed at rates rivaling those at BU-3.

Pertamina demanded tougher terms after studies by Indonesia's National Petroleum R&D Directorate (Lemigas) indicated recovery would be closer to 500 million bbl of oil. Several reports indicated that Pertamina expected a final resolution by yearend on the form of the agreement beyond 2010, with Indonesian Pres. Megawati Soekarnoputri making the final decision.

Pertamina revealed that companywide oil production averaged 101,000 b/d during January-August 2002.

Cepu TAC
Mobil Cepu Ltd. acquired the Cepu TAC from PT Humpuss Patragas of Indonesia in 2000.
The 1,670 sq km block, centered 150 km west of Surabaya, carried a $28 million spending commitment.

Pertamina operates six mature oil fields enclosed by and excluded from the TAC, five of which averaged a combined 2,300 b/d in 2000.

Kawengan field supplied 75% of that production. Previously the largest field in the East Java basin, it has produced nearly 100 million bbl of oil from about 2,000 ft since discovery in 1926 (OGJ, May 20, 1996, p. 86).

ExxonMobil said BU-3, one of the most significant oil discoveries in Indonesia in the past decade, cut nearly 1,000 ft of gross oil pay and more than 300 ft of gross gas pay. The well flowed at a rate of nearly 4,500 b/d from Middle Miocene carbonate and sandstone formations (OGJ Online, Apr. 12, 2001).

The company later said a second carbonate discovery, at the Sukowati prospect on the eastern part of the block, flowed more than 4,700 b/d of oil.

ExxonMobil in May 2001 started a 1,200 sq km 3D seismic survey over the block, the largest onshore survey ever acquired by the company.

At the time, the operator planned a phased, fast-track development for BU-3 with initial production from 6-10 wells starting in 2003.

More recent company information indicates that the parallel full-field development calls for gross output of 165,000 b/d starting in 2004 with a pipeline to a floating production, storage, and offloading vessel off Surabaya. Prospects for commercializing the gas were unclear.

More in Companies