From: Ed Davies, Reuters
Published August 10, 2009 06:34 AM

In Indonesia Development of Cepu Oil Field Begins

In Bojonegoro, Indonesia, development of a large oil field is likely to to get the economy pumping.

Oil production could start to flow from the huge Cepu field straddling East and Central Java later this month and eventually add millions of dollars to the coffers of local governments, as well as an influx of workers and a wave of new expectations.

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The Bojonegoro regency, which has a population of about 1.2 million, is currently the 4th poorest district in East Java, relying on a rural economy based on rice, corn and tobacco.

Suyoto wants to prioritize using the district's share of oil revenue, which is due to hit an annual peak of 2 trillion rupiah (about $200 million) in the next few years, to develop its pot-holed roads and upgrade agriculture through irrigation and greater use of livestock such as cattle and sheep.

Cepu was discovered by U.S. oil giant Exxon Mobil in 2001, but then faced hurdles ranging from land disputes to rows over revenue sharing and the routing of pipelines. The arguments raged despite a dire need for Indonesia to raise flagging oil output.

A deal was finally struck with state oil firm Pertamina in 2006 to jointly develop Cepu with Exxon as operator. Both firms hold 45 percent in the project and the remaining 10 percent is held by four local governments in Central and East Java.

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