Indonesia Regulator: Cepu Delay May Cost Exxon Local Chief's Job

Indonesia Regulator: Cepu Delay May Cost Exxon Local Chief's Job

JAKARTA--Indonesia's Cepu Block crude oil production site, operated jointly by Exxon Mobil Corp. (XOM) and PT Pertamina, is likely to face delays in reaching peak production, dealing a blow to the country's ambition to boost daily production to 1 million barrels and souring government relations with the U.S. firm, a senior official at the regulatory body overseeing upstream oil and gas said Monday.

Delays for oil exploration projects at the block "may cause the block to only reach its daily peak production of 165,000 barrels in November of 2014, not in May" of 2014, Widhyawan Prawiraatmadja, deputy of planning at SKKMigas, told Dow Jones Newswires in a telephone interview.

"That's partly caused by the incompetence of the local head of Exxon Mobil... He's not cooperative in speeding up the production process. That's what makes us not interested in extending his working permit," Mr. Prawiraatmadja said, without saying whether it had already issued a formal notification rescinding the permit of Richard Owen, the Indonesian head of Exxon Mobil.

Local officials of Exxon Mobil weren't immediately available for comment.

SKKMigas, a unit of the country's ministry of energy and mineral resources tasked with overseeing the upstream oil and gas sector, said in a statement that it views "Cepu Block as the backbone to increase Indonesia's oil production going forward."

It added that BPMigas, the regulatory body it replaces, has rescinded several working permits for a slew of foreign contractors in the past.

The south east Asian nation has consistently fallen short of its production target. In 2012, annual production averaged 865,000 barrels, below a government target of 930,000 barrels a day.

Late last year, the then vice minister of energy and mineral resources, Rudi Rubiandini, told The Wall Street Journal that the country would likely fail to meet its 2013 crude-oil production target of 900,000 barrels a day.

President Susilo Bambang Yudhoyono is keen to overturn such a trend and pledges to boost daily crude production to 1 million barrels in 2014, when his second and final term will end.

Indonesia left the Organization of Petroleum Exporting Countries in 2008 after becoming a net oil importer earlier in the decade. Output peaked at 1.6 million barrels a day in 1965 and again in 1976, and a lack of investment has seen the ratio of oil exploited to oil discovered fall below 100%.

-I Made Sentana contributed to this article.

Copyright (c) 2012 Dow Jones & Company, Inc.


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John Gateley | Jan. 29, 2013
"Thats partly caused by the incompetence of the local head of Exxon Mobil... Hes not cooperative in speeding up the production process. Thats what makes us not interested in extending his working permit," This comment is as revealing as it is unprofessional. You dont become CEO overnight. The man must be competent in a previous life. Uncooperative is a double edged sword and in Indonesia it is not difficult to see which edge is sharpest. Once upon a time, Suehartos daughter hadnt got the full backhander on time and so the country manager of Siemens was kicked out at a days notice for using the photocopier. He was working outside his job description. Live with it and laugh!

Tom Jerry | Jan. 28, 2013
I am willing to bet that this is merely Incompetence being covered up by blaming the Super major due to the Expectations by Geedy and Corrupt Officials in Indonesia for wanting higher production and their own unwillingness and inefficienciency to offer the required permitting and due to Geed, Corruption and Power in making ill fated decisions at the cost of others ambitious plans. Anyone or Company that works or have previously worked in Indonesia already know this, So until the Greedy and Corrupt Officials change thier buiness practices and become more transparent this will continue to happen and outside firms will have to take the blame.


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