UPDATE 1-CNOOC pulls out of Indonesia's W.Madura oil, Pertamina new operator

(Updates with details, quote)

By Alfian and Janeman Latul

JAKARTA, May 5 (Reuters) - Indonesian state energy firm
Pertamina has taken over as operator of the West Madura oil and
gas block from South Korea's Kodeco Energy, and China's CNOOC
has pulled out, reflecting the difficulties foreign
firms have in the country's oil sector.

The withdrawal of CNOOC, China's leading offshore oil and
gas producer, comes just days after a visit to Jakarta by
Chinese Premier Wen Jiabao, seeking to improve trust, trade and
investment ties between the two countries.

Chinese resource firms have struggled to get a foothold in
Indonesia, where local tycoons do not want to give up majority
control of assets and the state is looking for more
infrastructure investment rather than resource extraction.

Indonesia's government raised Pertamina's stake to 80
percent, from 50 percent earlier, while Kodeco now owns 20
percent, up from an initial 12.5 percent stake.

"Now, Pertamina is the operator of the block," Evita
Herawati Legowo, director general for oil and gas at the energy
ministry, told reporters.

The stakeholders reached a consensus on April 13 for
Pertamina to own 60 percent, while Kodeco and CNOOC along with
its partners would get 20 percent, according to minutes of the
meeting obtained by Reuters. However, Pertamina five days later
requested 100 percent ownership of the block.

R. Priyono, head of Indonesia's oil and gas
watchdog BPMigas, said CNOOC, which earlier held a 12.5 percent
stake, decided to pull out from the block.

Pure Link Investment, a CNOOC partner, said in an
letter dated May 4 sent to BP Migas that Pertamina's decisions
"are no longer consistent with the spirit of the April 13
consensus".

A source familiar with the matter said CNOOC had also
withdrawn an offer for Pertamina to own part of a stake in an
oil block in Angola.

Pertamina's spokesman Mochamad Harun said the company had
always acted consistently in expressing its stance on the West
Madura block, and maintained a good relatiionship with CNOOC.

"Since two years ago, we wanted to hold 100 percent of
participating interest and wanted to be the operator of the
block," Harun said.

China's oil and mining companies, including CNOOC
and Chinalco, are scouring the world -- from Australia to
Brazil, and Canada to Indonesia -- for targets to secure
long-term supply for the world's fastest growing major economy.

But China may have to settle for minority stakes and
financing deals when it comes to M&A targets in Indonesia's
resources sector, analysts and bankers say.

Global investment interest has risen given the country's
resources and booming consumer demand, though foreign investors
still complain of a myriad of rules and slow permit approvals,
while some politicians are seeking self-sufficiency in many
commodities.

The contract for the West Madura block, which produced 17.5
million barrels oil equivalent in 2010 for revenue of $817
million, had been due to expire on May 6. Indonesia, a former
OPEC member, has struggled to meet its oil production targets
and lift investment in the sector.

(Editing by Neil Chatterjee)