EXXON REMAINS INDONESIA'S CHOICE FOR GAS PROJECT

EXXON REMAINS INDONESIA'S CHOICE FOR GAS PROJECT

The government of Indonesia is signaling it still wants Exxon Corp. to develop the Natuna gas field in the South China Sea despite a continuing wrangle over terms.

"The government will not shift the exploitation (rights) to another firm," B.J. Habibie, the research and technology minister, said Tuesday."Moreover, the research and technology development agency has approved a

draft on the technology Exxon proposed," he told the economic newspaper Bisnis Indonesia. Mr. Habibie is also chairman of the agency.

Indonesia's state oil company Pertamina broke off negotiations last July after Exxon insisted on better profit-sharing, tax conditions and government guarantees.

Pertamina normally offers a 70-30 split in its favor. The company said it offered to take less, though it has not said how much, and that "the ball is with (Exxon)."

Talks on the estimated $40 billion project off Borneo later resumed, but no information has emerged on their progress.

Bisnis Indonesia quoted unnamed sources in Pertamina as saying Exxon officials have proposed a meeting with President Suharto to thrash out the issue.

The government previously set up a team from the ministries of mining and energy, finance, the national development planning board, the state secretariat and Mr. Habibie's agency to handle the project.

The field is believed to hold 150 trillion cubic feet of natural gas. Development costs will be high because the field contains significant quantities of carbon dioxide.

Exxon has technology that can extract the gas alone for fuel.

Mr. Habibie said the negotiations should be completed this year to safeguard the Indonesian market for liquefied natural gas. He noted that the Persian Gulf state of Qatar has just discovered a large gas find.

Indonesia is the world's largest exporter of LNG. It sells about 20 million metric tons (22 million tons) a year under lucrative long-term contacts with Japan, South Korea and Taiwan.

The government of Indonesia, concerned about dwindling supplies of oil and natural gas, said in August it would liberalize some terms on which it offers blocks to overseas companies, the mainstays of exploration.