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)