Indonesia Ends Exxon Gas Field Contract

Indonesia has terminated a contract with U.S. oil company Exxon Mobil Corp. to develop a natural gas field in the East Natuna Sea and is negotiating a new deal with company, the energy minister said.

Exxon Mobil insisted the deal stood, saying it had told the government it would fulfill its contractual obligations to develop the Natuna block and was in discussions with potential gas buyers.

A lengthy dispute between the two parties would concern foreign investors, who have long complained that poor contract enforcement in Indonesia make it hard for multinational companies to tap the country’s rich natural resources.

Energy Minister Purnomo Yusgiantoro told reporters late Tuesday that he had “met with Exxon and officially told them that the contract has been terminated because they couldn’t propose the commercialization and feasibility for the development of Natuna.”

Exxon Mobil and state-owned Pertamina are the joint contractors for Natuna, with Exxon Mobil holding a 76 percent contractor’s share compared to Pertamina’s 24 percent. Discovered in 1973, the field is estimated to have 46 trillion cubic feet of recoverable gas.

Exxon Mobil’s local unit spokesman Deva Rachman said the deal was still valid.

“We still have more years … (to develop Natuna) … according to our production sharing contract,” said Exxon Mobil’s local unit spokesman Deva Rachman.

Exxon and the government only recently agreed to end a long-running dispute over the development of another natural gas field in the country. That spat over the Cepu block was often held up as an example of the country’s uncertain investment climate