* New regulator calls for Exxon to replace local boss
* Call comes amid delays at Exxon-led Cepu project
* Also after Exxon's failure to sell some local assets
By Fergus Jensen
JAKARTA, Jan 28 A senior Indonesian official has
called for U.S. energy group Exxon Mobil to replace its
country manager after delays at one of its major oilfields,
fuelling concerns about state meddling in the sector.
Indonesia, the world's fourth-most populous country, is
pushing firms to develop huge oil and gas resources more quickly
to fuel rapidly expanding domestic demand.
But the former OPEC member has struggled to attract energy
investment since becoming a net oil importer in 2004 as the
government tightens its control over natural resources.
Indonesia is banking on the Exxon-led Cepu block in Central
Java, the country's biggest oil find in the last decade, to stop
a decline in the country's crude output, which fell to 860,000
barrels per day (bpd) last year from over 1.2 million bpd a
Gde Pradnyana, operations controller for new oil and gas
regulator SKKMigas, told Reuters on Monday there were more
delays at Cepu and, partly as a result, it had decided not to
extend the work permit for the head of Exxon Mobil's Indonesian
The permit for the chief executive, Richard Owen, was due
for renewal in February, he added.
"We think it's probably better for Exxon to nominate
somebody else, to replace him," Pradnyana said. "We're not
intervening in the way Exxon is doing their business, but we are
expecting a result."
Exxon representatives earlier said the company was "seeking
clarification from the Indonesian government" over Owen's
permit, but were not immediately available for comment on
Pradnyana's remarks on Monday.
Cepu's Banyu Urip field is expected to reach peak output of
165,000 barrels per day (bpd) by 2014, but as of Monday it was
only producing 24,000 bpd. Pradnyana said full production was
unlikely before August or September next year, behind the
initial target of May 2014.
The decision on Owen also comes after several Indonesian
firms failed in their efforts to buy natural gas assets that
Exxon had put up for sale in Indonesia's Aceh province, sources
familiar with the industry said. Exxon declined to comment.
"He wasn't cooperative enough," said an SKKMigas official,
who declined to be identified because of the sensitivity of the
issue. "(Exxon) wanted to sell the assets, but then suddenly it
didn't happen ... a lot of domestic companies were interested."
COOPERATE OR ELSE
Domestic energy self-sufficiency is a policy priority in
Asia's second-biggest crude oil producer and the world's
third-largest exporter of liquefied natural gas.
Resources are also a key issue in the run up to presidential
elections in 2014, and a rise in resource nationalism is a
growing risk for foreign operators in Indonesia.
Energy Minister Jero Wacik this month warned oil executives
to be "cooperative".
"If you change directions too much you'll be replaced," he
told executives during an contract signing. "Lots of foreigners
have been sent home because they didn't want to cooperate ... If
you have work areas that are not being used we'll remind you. If
it happens several times we'll take your permit."
The changing investment environment appears to be impacting
other producers. U.S. group Chevron has sent letters to
SKKMigas reserving the right to reduce its investment if
conditions in the country failed to improve, Pradnyana said.
Chevron is Indonesia's largest producer, accounting for 45
percent of the country's total crude output in 2012. The company
was not immediately available for comment.
Exxon in 2011 put declining natural gas assets in Sumatra up
for sale, with total output of about 215 million standard cubic
feet of gas per day, drawing interest from state gas distributor
PGN, state energy firm Pertamina and Indonesia's Medco
Energi. Pertamina and Medco said the price Exxon was
looking for was too high.
Sources close to the matter say Pertamina is eyeing control
of assets, though it likely lacks the expertise to develop a
technically difficult and costly project such as the huge Natuna
gas field off Borneo.
Some lawmakers are now pushing for Pertamina to get its
hands on the huge Mahakam gas block in Indonesian Borneo after a
contract giving Total and Japan's Inpex the right to
operate it expires in 2017.
Stakes in such projects would not just secure energy
supplies, but could also boost budget revenues.
In 2011, the oil and gas sector contributed 266.6 trillion
Indonesian rupiah ($27.6 billion) to domestic revenue, or 22
percent of the total, one of the top sources of state income.
"The government is becoming more intrusive in the management
of companies," said James Castle, chairman of CastleAsia, a
corporate consultancy in Indonesia with clients including
Exxon's Owen. "There's virtually no investment ... It's going
very slow because of resource nationalism, legal uncertainty - I
don't see it changing anytime soon."
The move on Exxon came weeks after the energy industry was
shocked by the constitutional court's ruling that scrapped
energy regulator BPMigas, following a challenge by Muslim groups
and others that said foreign firms were getting too good a deal.
Indonesia's parliament plans this year to issue a new law on
oil and gas that will set new ground rules for the energy
sector. The government has said it will retain a supervisory
role over the regulator.