Indonesia warns Exxon on failing Cepu oil output

JAKARTA, Aug 27 (Reuters) - Indonesia's oil watchdog, BPMIGAS, said on Thursday it may bring U.S. oil major Exxon Mobil XOM.N to arbitration court if the firm fails to produce 15,000 barrels per day (bpd) of crude oil from the Cepu block by the end of August.

The giant block in Central Java, which is being jointly developed by Exxon Mobil and Indonesian state oil firm Pertamina, began initial production last December with a volume of around 800 bpd.

In March, Exxon Mobil temporarily halted output at Cepu because of pipeline problems.

“There is an agreement from Exxon Mobil to produce oil from Cepu in August. If it fails, we may bring Exxon Mobil to arbitration court,” said Sulistya Hastuti, BPMIGAS spokesman.

Exxon Mobil Indonesia officials could not be reached for comment.

Separately, another BPMIGAS official said Exxon Mobil has promised to produce 15,000 bpd to 20,000 bpd of crude from Cepu in August, but several problems, including land clearing, have caused production delays.

“However, as an operator of the project, Exxon Mobil must solve the problems, and they should not delay the production,” the official, who declined to be identified by name, told Reuters.

“BPMIGAS may also change the operator in Cepu block to Pertamina,” the official said.

Cepu, which ranks among the U.S. major’s top 10 projects worldwide, is expected to produce 165,000 bpd when it reaches peak output in 2012.

Indonesia hopes the project will help arrest a sharp slide in its crude production as ageing fields struggle to maintain output. (Reporting by Muklis Ali; Editing by Sara Webb)