‘No Mediation’ with Exxon over Gas Field

JAKARTA ~ The central government and US oil giant Exxon Mobil have decided not to seek arbitration during talks over disputed drilling rights for a major gas field off Kalimantan, state media said.

Last year Indonesia terminated a contract with the firm to develop the field in the Natuna Sea, claiming slow progress. Exxon Mobil disputed the move, saying the contract was valid but later agreed to talks.

“Both parties will not take the case to an arbitration body during the negotiation period,” government official Kardaya Warnika was quoted as saying by the Antara news agency on Wednesday.

The government was still considering proposals advanced by Exxon Mobil during the talks and had asked for some new terms, including on profit sharing, he said.

“We have not received them yet. We have asked that they be submitted as soon as possible,” he said.

Reports said Exxon Mobil had proposed the development of the field be halted during the negotiations.

Exxon Mobil has said it has spent more than US$350 million on the block since development work began in 1980.

In March 2006, Exxon Mobil and the government ended a similar long-running dispute over the development of the Cepu oil field on the main island of Java by concluding a joint operating agreement.

The four-year Cepu dispute was watched carefully by foreign investors, who have long complained about a host of obstacles to doing business in Indonesia.

Such concerns are said to be among the reasons why Indonesia, Southeast Asia’s only member of the Organisation of Petroleum Exporting Countries, has become a net oil importer in recent years.

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