Exxon Exec: Natuna Contract Not Terminated or Expired

JAKARTA Oct 12, 2006 (Dow Jones Newswires)

A senior Exxon Mobil Corp. (XOM) executive said Thursday the firm's development contract for the Natuna D-Alpha gas block hasn't expired or been terminated.

"We believe the contract is still in existence," said Robert W. Haines, Exxon Mobil's international senior advisor for Asia Pacific.

Indonesian officials have said the government has terminated Exxon Mobil's contract to develop the Natuna D-Alpha gas block in Indonesia's East Natuna Sea.

Haines was speaking to reporters on the sidelines of a press briefing of the U.S.-Asean Business Council Inc.

His comments are a response to assertions by two senior government officials this week that Exxon Mobil had lost its contractual rights to develop the Natuna block.

The chairman of the official upstream oil and gas regulator BPMigas, Kardaya Warnika, told reporters Wednesday that Exxon Mobil's Natuna contract had "expired" in 2005. That followed Minister of Energy and Mineral Resources Purnomo Yusgiantoro's comments Tuesday that the government had "terminated" Exxon Mobil's Natuna contract.

Exxon Mobil has responded to those comments by insisting that it has the contractual right to continue development until 2009 of the Natuna block, which the firm estimates holds 46 trillion cubic feet of recoverable natural gas reserves.

In December, Exxon Mobil Indonesia Inc.'s president and general manager, Peter J. Coleman, told reporters that the company was proceeding with a "four-year plan" to deliver natural gas from the Natuna D-Alpha block to foreign buyers by 2014.

Coleman told Dow Jones Newswires Thursday that the government hadn't yet directly informed Exxon Mobil that the Natuna contract had expired or been terminated.

Exxon Mobil still has two years remaining on its existing Natuna contract, he said, without elaborating.

At a separate event Thursday, Exxon Mobil reinforced its intention to fulfill its contract to develop Natuna.

"Exxon Mobil is committed to continuing implementing the Natuna (contract) with the objective of commencing development activities as soon as possible," a statement issued by the company said.

"The Natuna production sharing contract obligates all parties, including BPMigas, to conduct diligent efforts to satisfy conditions for (Natuna's) development."

The statement said Exxon Mobil and state-owned Pertamina (PTM.YY), the joint contractors for the Natuna block, had already spent $400 million to "delineate and commercialize" Natuna, without elaborating.

The Natuna spat has unsettling echoes of the lengthy disagreement between Exxon Mobil and Pertamina over a joint operating contract to tap the massive Cepu block in East Java. That dispute became a symbol among foreign investors and analysts of the perils of contract enforcement in Indonesia before it was finally resolved in March.

Haines said he was confident that the current disagreement over Natuna would be resolved, without providing any specific timetable.

"We have a dialogue going with (the government) and we'll have this resolved like we've resolved other issues," Haines said, without elaborating.

Copyright (c) 2006 Dow Jones & Company, Inc.

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