AG and BPKP to audit all Pertamina contracts

AG and BPKP to audit all Pertamina contracts

JAKARTA (JP): The Attorney General's Office and the
Development Finance Comptroller (BPKP) will conduct legal and
financial audits of contracts between the state oil and gas
company Pertamina and companies linked to former president
Soeharto's family and cronies.

The House of Representatives's Commission V for industry,
mining, trade, manpower, cooperatives and the environment and
Minister of Mines and Energy Kuntoro Mangkusubroto agreed
yesterday on the urgent need for an overall audit of all of
Pertamina's contracts.

"The audit is to ascertain if the contracts were made through
illegal practices," the House commission's chief, Marzuki Achmad,
said.

Documents produced by the commission show there are at least
149 companies linked to Soeharto's family and cronies which are
involved in Pertamina's operations in the oil and natural gas
industry.

The documents disclose that the Soeharto family dominates the
shipping of liquefied natural gas (LNG), crude oil and fuel, gas
pipeline network development, geothermal power and the
development of refineries and many other aspects of the
hydrocarbon sector.

One of the companies discussed in the hearing was PT Transjava
Pipeline, which is 49 percent owned by Soeharto's son Bambang
Trihatmodjo, 28 percent by PT Tranaco, 10 percent by Pertamina's
pension fund, 10 percent by the pension fund of PT Perusahaan
Listrik Negara (PLN) and 5 percent by PT Adhi Raksa Tama.

The company has developed a gas pipeline to channel natural
gas from the gas field in Kangean, Madura to the fertilizer plant
and PLN's power plant in Tuban and Gresik, East Java.

Pertamina has been using the pipeline under a 20-year
building, operation and transfer contract at the cost of 72 U.S.
cents per million British thermal units (MMBTU).

Golkar Legislator Priyo Budi Santoso estimated that the
company received US$42 million per month in fees.

He said the fees were too expensive and alleged that Transjava
had marked up its investment in the pipelines on which the
expensive fees had been based.

"The price of gas for PLN could be reduced if the pipeline
lease fee is cut," Priyo said.

The hearing also touched on the latest move by state
electricity company PLN to unilaterally annul its power purchase
contract with PT Cikarang Listrindo after the latter refused to
renegotiate the contract.

PLN president Djiteng Marsudi earlier indicated that the
company was likely to take a similar move against other
independent power producers (IPPs) which refused to renegotiate
their contracts.

Marzuki said the House supported PLN's plan to void all
contracts which placed excessive financial burdens on PLN.

But, he said, in case an outright annulment was impossible,
PLN should renegotiate with the IPPs on the contractual terms,
including power prices, to alleviate PLN's financial problems due
to the monetary crisis.

Kuntoro, however, expressed concern over PLN's unilateral
termination of the contract.

But he said he would not intervene because PLN, like most
other state companies, had been put under the supervision of the
office of the State Minister for the Empowerment of State
Companies.

"It's up to PLN (how to treat its contracts). As for other
contracts under the Ministry of Mines and Energy, I have stated
that all the contracts will be honored," Kuntoro said.

The commission and Kuntoro also agreed yesterday to ask the
Attorney General's Office to investigate alleged corruption at
Pertamina's refinery in Balongan, West Java, which has often
stopped operations due to alleged technical problems.

Golkar legislator Djusril Djusan said he had complete data
showing that several officials and Pertamina executives had
marked up the price of the construction of the refinery to $2.4
billion from a normal cost of less than $1.6 billion.

"In comparison, in San Francisco where workers and equipment
are more expensive than in Indonesia, a refinery with the same
capacity of Balongan costs only $1.6 billion," Djusril said.

The Balongan refinery has a processing capacity of 125,000
barrels per day of crude oil.

Djusril said the attorney general should investigate the
officials responsible for overseeing the project, including then
minister of mines and energy Ginandjar Kartasasmita, then
minister of finance J.B. Sumarlin and then Pertamina president
Faisal Abda'oe.

The Balongan refinery was constructed by a group of
contractors, including Japan's JGC Corporation, Foster Wheeler of
the United States and the Far East Trading Corp., an affiliate of
Pertamina. The construction of the refinery started in 1990.
(jsk)