Indonesia prepares to go it alone on Natuna gas

JAKARTA, Feb 19 (Reuters) - Indonesia asked its state oil firm Pertamina on Tuesday to get ready to develop the huge but complex natural Natuna D-Alpha gas reserves on its own, the latest sign it is moving on without former partner Exxon Mobil Corp (XOM.N).

Indonesia has said talks with Exxon have stopped on the offshore gas project, estimated to need investment of about $40 billion, due to disagreements on how to split gas output. Exxon Mobil says its contract to develop the field lasts until 2009, but Indonesia says it has to cede its 76 percent share.

"The president (Susilo Bambang Yudhoyono) has asked Pertamina to prepare a feasibility study, including which partners Pertamina will take before the firm develops Natuna," Purnomo Yusgiantoro told reporters.

"I will write a letter to Exxon Mobil that the Indonesia government cannot accept the pending issues with Exxon Mobil because the issues are very difficult to be resolved," he said.

He said the issues included tax, extension of the contract period and how to split the gas.

Members of parliament have in the past criticised the government for agreeing to conditions in the Natuna contract that they say favoured Exxon Mobil instead of the government.

Natuna is one of the biggest investments in the oil and gas sector in Indonesia, which desperately needs foreign investment to reduce unemployment levels and spur economic growth.

Indonesia's oil watchdog has said the government wants a 65 percent split in its favour and 35 percent for the contractor. Exxon has rejected the proposal.

Exxon Mobil Indonesia spokeswoman Deva Rachman said on Tuesday it expected talks with the government to continue.

Pertamina president director Ari Soemarno told reporters the company was ready to carry out a feasibility study on Natuna within three weeks and would report to the president.

Purnomo said in October if talks with Exxon failed the government might give the gas block to Pertamina, which has a 24 percent stake in the block. Exxon Mobil has 76 percent.

The Natuna D-Alpha block has around 222 trillion cubic feet (tcf) of gas reserves, of which about 46 tcf are thought to be commercially recoverable.

The block, which is about 1,100 km (680 miles) north of Jakarta and 200 km east of the West Natuna fields that feed gas to Singapore, accounts for about a quarter of Indonesia's total commercially recoverable gas reserves of 182 tcf.

The energy minister said last year the price of Natuna gas, which contains around 70 percent carbon dioxide, was still too high, making it expensive to develop and difficult to sell. (Reporting by Muklis Ali, editing by Sugita Katyal)