Indonesia is desperate to increase oil production and president Susilo Banbang Yudhoyono said he would end the stand-off over Cepu, which could contain up to 1 billion barrels of oil, according to the Financial Review.

The government set up a special taskforce in April to end the revenue sharing argument between ExxonMobil and Indonesia’s state-owned oil company Pertamina.

As part of the agreement, ExxonMobil will lower its revenue share in developing Cepu so the contract can be extended.

Under the agreement, ExxonMobil and Pertamina, as the contractors of Cepu, will each receive a 45% participating interest in the block, while the reional government will have the reamining 10%, AFX News reported.

While oil prices are more than US$45 a barrel, ExxonMobil will get 6.75% of the field’s revenue, increasing to 13.5% if barrel prices drop beneath US$35.

ExxonMobil purchased the field in 1999 and has said it has discovered 600 million barrels of proven oil reserves.

But the company said it would not develop the field until the contract, due to finish in 2010, was extended by 20 years.

Pertamina said it intended to let the contra ct lapse so it could have the field to itself after 2010.

Following the neewly concluded deal, it is expected the field will first produce in 2008, increasing Indonesia’s oil output by 18% and giving foreign investors greater confidence in dealing with Indonesian authorities.