The cost of developing Banyu Urip, the main oil field in the Cepu area, may exceed $2 billion, compared with the initial estimate of $1.2 billion, Ferederick Siahaan, Pertamina's finance director, said in Jakarta today. The state company will seek $1 billion of loans next year to fund the project, he said.
Opposition from landowners has delayed production from Cepu, the Southeast Asian country's largest untapped oil deposit, by about a year to October 2009, Iin Arifin Takhyan, vice president of Pertamina, said on Aug. 23. The Indonesian government wants Cepu to start pumping crude oil by the end 2008 to help reverse a 10-year slide in output.
``Everything is changing. Cost is going up,'' Siahaan said in an interview in Jakarta today. The previous cost estimate was made in 2003, he said.
Drilling costs are higher now compared with three years ago, Deva Rachman, spokeswoman for Exxon's Indonesian unit, said by telephone in Jakarta today. She said the revised cost of developing Banyu Urip would ``probably'' be around the level estimated by Pertamina.
The total cost to develop Cepu, which consists of several fields, will also climb from the initial estimate of $2.6 billion, Siahaan said. Cepu is estimated to have 600 million barrels of reserves and peak production of 165,000 barrels of oil a day.
The area will initially produce 10,000 barrels a day, Pertamina's Takhyan said on Aug. 23. That's lower than the 15,000 barrels a day planned earlier.
Exxon and Pertamina each have a 45 percent stake in the venture to develop Cepu, while local governments hold the remaining 10 percent.
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