Indonesia's talks with ExxonMobil hit a hurdle

Indonesia's talks with ExxonMobil hit a hurdle
Reuters Published: September 25, 2007, 23:45

Jakarta: Indonesia and ExxonMobil have halted negotiations on the disputed Natuna D-Alpha gas block, now controlled by the US company, an official at energy watchdog BPMIGAS said yesterday.

Talks on the offshore gas project, estimated to require investment of about $40 billion, have run into several problems, attracting the attention of foreign investors who are already wary of committing money to Southeast Asia's biggest economy because of its weak legal system, bureaucracy and corruption.

The most recent setback over Natuna has arisen because the two parties involved cannot agree on how to split the gas produced, the official said, but other unresolved issues include the length of Exxon's contract.

The Indonesian side is waiting for the government to issue new instructions before talks can resume.

Controlling issues
Exxon controls a 76 per cent stake in the Natuna block while Indonesian state oil and gas firm, Pertamina, owns 24 per cent and would like to increase its stake to half.

Indonesia also says that Exxon's contract giving it that 76 per cent share has expired, whereas the energy major has said the contract is valid until 2009.

The BPMIGAS official said the two sides stopped talking recently because they could not agree on how to split the gas produced from the block.

"Indonesia wants a 65 per cent split for the government and 35 per cent for the contractor. Exxon has rejected the proposal because it wants more," the official said.