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August 12, 2008

Production at Indonesia’s Cepu oil block may be delayed
Oil production at the Cepu block, Indonesia’s biggest oil find in a decade, may start later than scheduled December this year, due to some delays in parts of the project, said Reuters on Monday.

According to an official at the state oil firm Pertamina, the launch of the oil production may delay till February or March next year, said Reuters.

Indonesia had previously said that production at Cepu’s Banyu Urip field, which is being jointly developed by US oil major Exxon Mobil and Pertamina, would start in December this year.

The giant onshore Cepu block, located between Central and East Java provinces, contains several other fields including Alas Dara/Kemuning, Jambaran and Cendana, which have not yet started production.

Meanwhile, Maman Budiman, senior vice-president at Exxon Mobil Indonesia, said that the company was still trying to meet the December target. “It (Cepu) is still in process, there are routine problems but there is no (big) issue. It is an ongoing process,” he said.

Cepu ranks among the major’s top 10 projects worldwide, and Indonesia is hoping that it will provide a big boost for the country’s domestic oil and gas output.

Pertamina said it estimates oil reserves in the main Banyu Urip field in the Cepu block at 350 million barrels, above Exxon’s initial assessment of 250 million barrels.

The cost of developing the Banyu Urip oilfield is also expected to rise from initial estimates of $1.2 billion, due to higher drilling costs and land clearing.

Exxon Mobil had said previously that the total cost of developing the whole Cepu block was about $2.6 billion, although the cost for Banyu Urip alone would be revised up from its initial estimate of $1.2 billion.

Indonesia, Asia-Pacific’s only OPEC producer and the only member which is a net importer of oil, has struggled to maintain output as it has failed to tap new oilfields fast enough to compensate for older ones as they become less productive.

The Indonesian government hopes that a quick development of Cepu will help reverse the country’s shrinking oil output.

Indonesia produced 857,900 bpd in July, slightly down from June’s 859,000 bpd.

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