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The local government of the Riau Islands province plans to
ask for ownership in oil and gas fields being developed in its Natuna
Sea area, amid ongoing contract negotiations for the D-Alpha block.
Besides the particular gas-rich block, the contract for which the
Indonesian government had recently terminated with U.S. oil giant
ExxonMobil, other fields currently being developed by foreign operators
Conoco Oil, Premier Oil and Star Oil will also fall under the planned
scheme.
The plan will be proposed to the central government for approval and is
currently being discussed with the operators, Riau Islands Governor
Ismeth Abdullah told The Jakarta Post last week.
"Several operators have met us to discuss the issue, including Exxon,
which has principally agreed with our proposal if they are appointed
again to develop the (D-Alpha) block," he said. "But we haven't agreed
on how much the ownership will be."
The plan is important to increase the province's local revenue from the
oil and gas sector, Ismeth further said, mentioning how the central
government's revenue share for the region was not enough.
It will also serve as an exchange for the province having contributed
in helping carry out related administrative work for the projects and
ensuring their security, as well as a contribution to improve the
welfare of the local community.
Revenue sharing from the oil and gas sector for the Riau Islands
currently amounts to Rp 180 billion (US$19 million) per year, and
another Rp 600 billion for the Natuna Islands regency, where most of
the oil and gas development projects are located, he said.
The Natuna Islands is located in the South China Sea, some 1,000
kilometers northwest of Jakarta.
If the province owns a share in the projects, it will then not only
receive revenue sharing funds, but also their profit dividends, Ismeth
said, learning from the experience of Central Java's Bojonegoro
regency, which managed to get a share in the Cepu block, with the
dispute over its development with Exxon having been recently settled.
The Indonesian government and Exxon had been caught up in a similar row
over the status of the D-Alpha block, which was discovered in 1973 and
is estimated to contain 222 trillion cubic feet of gas, of which 46
trillion is commercially recoverable.
Exxon has a 76 percent interest in the gas field, which was discovered
in 1973, while the remainder is owned by state oil company PT Pertamina.
The government terminated the contract it awarded to Exxon in 1984,
arguing it had expired and was dissatisfied with Exxon as it had not
developed it, but only submitted a commitment letter to extend the
contract rather than a complete feasibility study.
Exxon had delayed drilling in the block due to the costly
carbon-dioxide extraction process. It also claimed that based on a 1995
amendment to the contract, it had an option to extend the contract,
which matured in 2005, on a total of two occasions for a period of two
years each time.
The contract is now being renegotiated, with the government likely to
prioritize Exxon in developing it again if it can offer better terms,
Kardaya Warnika, chairman of the state oil and gas regulator BPMigas
was quoted Saturday by Bloomberg.
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