ExxonMobil Bids to Explore Indonesian Blocks in Makassar Straits

Makassar Straits
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Cepu Oilfield
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Exxon Mobil Corp. (NYSE:XOM - News) has bid for Indonesia oil exploration blocks in the Makassar Straits, a company official said on Wednesday, despite a nagging dispute over its role in the Cepu block on Java island.

In June last year, Indonesia offered 27 new exploration areas, for which eight contracts were signed in October.

"We have submitted a bid for two offshore blocks, Pasangkayu and Surumana, in Makassar Straits," Exxon Mobil Indonesia vice president Maman Budiman told Reuters.

The government had said that for Pasangkayu and Surumana, any oil find would be split 65 percent for the government and 35 percent for the contractor. Any gas find would be split 60 percent for the government and 40 percent for the contractor.

"We believe there is still potential to find hydrocarbon in those areas. Exxon will continue to invest in Indonesia amid negotiations over Cepu block," Budiman said.

"In negotiating, sometimes quick and sometimes slow (is) usual. However, there is still hope for a solution," he said.

Talks between state oil company Pertamina and Exxon Mobil have been deadlocked over who will operate Cepu, casting uncertainty over one of Exxon's 10 biggest undeveloped oil finds and OPEC-member Indonesia's best hope for stemming declining output.

Indonesia signed an oil contract with Exxon Mobil and Pertamina for the Cepu block in September that gave a 45 percent stake to each party and 10 percent for the regional government on Java island.

Progress has since stalled because of disagreement over who should operate the field, with Pertamina arguing it and Exxon should share the task and the U.S. supermajor saying it is the rightful operator.

State Enterprises Minister Sugiharto said on Monday Indonesia was drafting a joint-operator agreement between the two companies for Cepu, but it could take time to formulate details.

Sugiharto, who had said in December that the companies should reach agreement in early January, has stated the delay in the project will harm the Indonesian oil sector.

It is already suffering from declining crude oil output, with daily production slumping to a 35-year low of 916,000 barrels in January and may keep falling as the country fails to tap new fields fast enough to offset dwindling production.

Cepu, Indonesia's biggest oil discovery in decades, has estimated recoverable reserves of up to 600 million barrels and is expected to produce ultimately up to 180,000 barrels per day (bpd), boosting the country's production by 20 percent.

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