Indonesia to terminate Exxon Mobil contract

Offshore staff

JAKARTA, Indonesia -- The Indonesian government has decided to terminate Exxon Mobil Corp.'s contract to develop the Natuna D-Alpha block in the Natuna Sea. Production from Natuna D-Alpha has been delayed since the 1980s because the field's 222 tcf of natural gas reserves contain 71% carbon dioxide.

According to Priyono, the director general for upstream commercial oil and gas development at the Energy and Mineral Resources Ministry, the letter terminating the contract is to be issued in May.

ExxonMobil says it remains in charge of the project, development of which would cost as much as $40 billion.

Priyono reportedly told the Jakarta Post that the upstream oil and gas regulator will finish processing the legal documents and other administrative matters between March and June of 2007.

Last December, Energy and Mineral Resources Minister Purnomo Yusgiantoro agreed with the recommendation of the regulator to terminate the ExxonMobil contract.

The contract, initially signed in 1980 and amended in 1995, gives the American energy giant another 10 years to develop the reserves, more than 40 tcf of which could be produced for both the local and export markets.

ExxonMobil is expected to hold a dialogue with the Indonesian officials on furthering the potential of developing the reserves, industry observers said.

Meanwhile, the government is expected to ask cash-strapped state oil and gas company PT Pertamina to develop the block.

1/12/2007