With Friends Like Exxon...  

Rigzone reports on Indonesia's attempt to get back to net oil exporter status. Unfortunately it seems to involve selling out to whatever Exxon are demanding rather than a crash energy efficiency program.

Exxon Mobil has found a friend in the Indonesian president, Susilo Bambang Yudhoyono.

Exxon Mobil has been dickering with Indonesia's state-owned oil company, Pertamina, for the past four years about how to proceed with drilling at the country's most promising oil field. Yudhoyono apparently got tired of waiting. Faced with a drop in production that has turned his impoverished country into a net oil importer as prices soar to record highs, Yudhoyono's government decided this week that the best way to push a deal forward would be to fire Pertamina's board of directors, including its president director, Widya Purnama.

"They have to be replaced," said Rizal Malarangeng, a member and spokesman of the team negotiating with Exxon Mobil on behalf of the government and Pertamina. "We're talking about days here. Maybe next week."

No mention has yet been made of who might replace Purnama, who was appointed as head of Pertamina shortly before Yudhoyono's election last year. But analysts said Yudhoyono's sudden and sweeping move was likely to produce a deal at last for Exxon Mobil to produce oil near the central Javan town of Cepu.

With estimated reserves of at least 600 million barrels of crude oil, Cepu could reverse Indonesia's deficit in oil, bolster government coffers and help restore confidence among oil companies and among foreign investors in general. "It will provide further confidence in the structure and environment in which producers can operate in Indonesia," said Angus Graham, a regional oil industry analyst at CLSA Emerging Markets. An Exxon Mobil spokeswoman in Jakarta, Deva Rachman, said the company expected to sign a final agreement on Cepu by the end of next month. Pertamina did not respond to requests for comment. A deal on Cepu will not raise Indonesia's oil output immediately, analysts said. Developing the field and producing oil is likely to take at least another year, they said.

When it does come on stream, though, Cepu will help alleviate a decline in production that has forced Indonesia, the only Asian member of the Organization of Petroleum Exporting Countries, to rely on imported crude for its energy needs.