Quoting an official from energy sector watchdog BPMIGAS, the news agency reported Cepu might be unable to meet scheduled start-up in 2008, due to problems arising over issues such as land clearing.

While ExxonMobil president Peter Coleman confirmed reduced output was possibile, he said first production would not be delayed.

In March, ExxonMobil and Indonesian state oil company Pertamina signed a joint operating deal, ending a long-running dispute between the partners over who would operate the $US2.6 billion ($A3.34 billion) development.

Cepu is estimated to contain up to 600 million barrels of recoverable oil reserves. It was originally flagged to start-up at 25,000 barrels of oil per day (bopd) and was expected to reach a peak production of up 180,000bopd.

Pertamina and ExxonMobil each have a 45% stake in Cepu; the remaining 10% is held by the local governments.