JAKARTA, Indonesia (AP) - U.S. petroleum giant Exxon Mobil Corp. has accepted a revenue-sharing agreement with Indonesia's state-owned oil firm Pertamina over a large untapped oil block, but talks on a final deal are ongoing, the government said Thursday.
"We have made progress,'' Rizal Mallarangeng, the spokesman of the Indonesian government team negotiating the dispute over revenues from the Cepu block, told Dow Jones Newswires.
Deva Rachman, a Jakarta-based spokeswoman for Exxon Mobil's local unit, declined to comment on whether the company had reached a revenue-sharing agreement, saying that the company had "a constructive engagement'' with the government in resolving the Cepu dispute. She did not elaborate.
The longrunning dispute is being watched closely by foreign investors as an indication of the country's investment climate, which critics say is marred by lack of legal certainty and weak state institutions.
Mallarangeng said Exxon Mobil had accepted a 6.5 percent share of revenue from Cepu's output if oil prices are above $45 (euro37) a barrel and a 13.5 percent share of revenue if the prices fall below $35 (euro29)
"If the oil price is lower we'll give them a higher revenue split, so they can still make reasonable profit,'' he said.
Exxon Mobil bought the rights to the Cepu block in east Java province in 1988 from a company run by Tommy Suharto, a son of Indonesia's former president.
Shortly thereafter, the U.S. company discovered that the oil block contained a commercial quantity of crude oil.
The government is refusing to extend its contract, due to expire in 2010, until it negotiates a revenue sharing agreement with the company.
The Cepu oil block contains estimated reserves of some 600 million barrels of crude oil.
The dispute over the block is often cited as an example of the policy confusion that has caused Indonesia's crude oil output to plunge in recent years, turning the country into a net importer of crude oil during several months last year. - AP
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