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Upstream oil and gas regulator BPMigas disclosed Friday that
operators of oil and gas-rich Cepu block on the border of Central Java
and East Java were still encountering problems securing land around the
concession.
BPMigas deputy chairman Abdul Muin was concerned the problems could
delay the block's production of the oil and gas needed to help jack up
the country's declining oil production levels.
He said BPMigas would request assistance from other ministries and
agencies in resolving the problem ensuring an initial 20 hectares could
be acquired around April.
"It will involve a number of parties, such as the Forestry Ministry,
local governments and the police," Muin said, as quoted by Antara.
According to Muin, the agency had even asked Vice President Jusuf Kalla
to help resolve the problem.
U.S. energy giant Exxon Mobil Corp. and state-owned oil and gas company
PT Pertamina are the operators of the Cepu block, which is estimated to
hold 600 million barrels of oil and 1.7 trillion cubic feet of gas
reserves.
The government has set a target for the operators to produce 10,000
barrels of oil per day by the end of 2008, following an agreement to
fast-track the development of the block.
The block is expected to produce 25,000 barrels of oil a day in early
2009. The figure could eventually peak to some 165,000 barrels a day.
In total, Cepu operators need to purchase some 600 hectares of land
from local residents for its operation.
However, the prices have jumped more than 1000 percent due to
speculation from land brokers.
According to Muin, landowners offered to sell their properties for Rp
300,000 (US$32) per square meter, up from the normal price of Rp 20,000
per square meter.
Rampant land speculation ahead of the construction has caused
project-cost inflation and uncertainty for investors.
Numerous infrastructure projects have run aground due to problems
related to land acquisition, with investors facing widespread protests
and opposition from landowners, often backed by local administrations.
Muin hoped the involvement of other related agencies would help curb
speculation and opposition from residents living in the vicinity of the
block.
"We hope to start production on the 20-hectare land as soon as
possible. We hope this will be resolved at least by the end of this
year," he said.
Muin said after acquiring the land, operators could proceed to the next
level of constructing production facilities and distribution pipelines.
The government has set a target of increasing its oil production by 1.3
million barrels per day by 2009, with Cepu expected to start pumping
crude oil by the end 2008 to help reverse a 10-year slide in the
country's output.
To develop the industry, Exxon Mobil Corp. and Pertamina are signed to
a 30-year contract which expires in 2034.
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