Indonesia eyes bigger share in Natuna D-Alpha block

JAKARTA, Jan 5 (Reuters) Indonesia's energy minister said on Friday the government wants state oil and gas firm Pertamina to have a larger share in the disputed Natuna D-Alpha gas block, as the deadline for development of the field looms.

Pertamina has a 24 percent stake in the huge gas block that has around 222 trillion cubic feet (tcf) of gas, of which 46 percent tcf is thought to be commercially recoverable. U.S. oil major Exxon Mobil Corp. holds the remaining 76 percent.

''Our consideration is we want to maximise the results that we can get from Natuna block, and we want Pertamina to have more share,'' Purnomo Yusgiantoro told reporters.

''But we know that there are some constraints like technology, financial and other issues, so we have to compromise.'' When asked what stake the government wanted for Pertamina, Purnomo said: ''We have not put that on the table.'' Despite the huge resource, the Natuna D-Alpha block contains about 70 percent carbon dioxide, making it expensive to develop and difficult to sell.

The Indonesian government terminated a contract held by Exxon Mobil to operate the huge Natuna D-Alpha gas block late last year, amid high extraction costs and a lack of buyers for the gas.

Exxon Mobil has disputed the termination and said the contract allows for two more years for it and Pertamina to satisfy conditions, or proceed with development even if the terms for development of the field are not met by Monday.

Indonesian oil watchdog BPMIGAS said in November that talks with Exxon Mobil on operating rights for the Natuna D-Alpha gas block are expected to be completed in January.

Despite the difficulties developing the field, the move to end Exxon's contract may cause concern among foreign investors about uncertainties of doing business in Indonesia, compounding worries over the legal system, labour and corruption.

Indonesia and Exxon Mobil signed a basic agreement in 1995 covering an estimated billion to be invested in the offshore gas project in the South China Sea.

The gas in Natuna D-Alpha, about 1,100 km (680 miles) north of capital Jakarta and 200 km (124 miles) east of the West Natuna fields that feeds gas to Singapore, accounts for about a quarter of Indonesia's total gas reserves of 182 tcf.

Asia Pacific's sole OPEC member has far more gas than oil, and is trying to phase out costly oil-fired power generation and uses more of its cheaper, cleaner natural gas domestically.

But the country faces limited supplies due to long-term LNG export commitments, which it is reviewing.

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