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Indonesia Wants to Boost Share in Disputed Gas Block

Indonesia wants to boost its share of the revenues from a disputed offshore natural gas block held by U.S. oil giant Exxon Mobil, Minister of Energy and Mineral Resources Purnomo Yusgiantoro said late Tuesday.

Indonesia wants as much as a 65% share of revenue from the Natuna D-Alpha, located in the South China Sea. Under the current agreement with Exxon Mobil , the operator of the block, revenues due to the government are 35% of the sales from any gas produced in the block, he said.

The two sides have been negotiating new terms, but so far have come to no agreement.

"The (Indonesian) vice president emphasized that the standard production sharing contract (formula) should be applied (to the block)," Purnomo said.

Exxon Mobil is the operator of the Natuna D-Alpha block with a 76% share in revenues not due the government. State-owned oil and gas company is a partner in the field, with a 24% stake in non-government revenues. Pertamina has said it want to increase its share in the production sharing contract to 50%.

The block, discovered by Italy's Agip in the 1970s, holds an estimated 46 trillion cubic feet of recoverable natural gas reserves, about half of the total reserves Indonesia had at the end of 2006, according to BP's Statistical Review of World Energy.

The gas has never been developed because of its high carbon dioxide content and its remoteness from ready markets.

The standard contract that exploration companies sign with Indonesia has given them a 30% share of any natural gas produced from a discovery, with 70% going to the government. The higher split for Exxon and Pertamina on the Natuna D-Alpha block indicate the perceived difficulty of devoping the field.

Oil companies get higher splits of gas revenues in contracts for exploration and production considered technologically difficult - such as in remote deep-water areas.

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