"The president asked Pertamina to be ready after two years of negotiations with ExxonMobil … failed to yield an agreement," the Antara news agency quoted Energy and Mineral Resources Minister Purnomo Yusgiantoro as saying.

He added the state company had three weeks to state its readiness to the President.

Yusgiantoro said there had been eight major issues on which the Government and ExxonMobil could not arrive at an agreement with three of them relating to the law.

"The government will soon send a letter to ExxonMobil in relation with the decision that it is difficult to find a way out of the eight pending issues."

Negotiations between the two parties broke down earlier this month prompting Kardaya Warnika, the chairman of Indonesian upstream oil and gas regulator BP Migas, to say there would be no further negotiations.

Negotiations on the contract extension started after the Government claimed ExxonMobil's rights had been terminated in 2005, as the company had failed to show any progress in developing the field.

However, ExxonMobil denied the claim, saying it had already spent around $US400 million on exploring the field, which eventually gave it the right to an extension until 2009.

The Natuna D-Alpha block has around 222 trillion cubic feet (Tcf) of gas reserves, of which about 46Tcf are thought to be commercially recoverable.

Developing the site is expected to cost more than $US30 billion due to the high (70%) carbon dioxide content of the gas, making it difficult to extract and process.