Tue, 21 Nov 2000

Attorney General: Four graft cases found in oil contracts

JAKARTA (JP): The Attorney General's office said on Monday that thus far it has found only four contracts entered into by state oil and gas company Pertamina during former President Soeharto's era with "preliminary evidence of corruption".

Attorney General Marzuki Darusman said the four contracts were selected out of the 159 contracts and project proposals with "indications of corruption" submitted by Pertamina to the government after the downfall of Soeharto in 1998. All the 159 contracts and project proposals involved Soeharto's family and cronies.

The four contracts were all oil and gas Technical Assistance Contracts (TAC) entered into by Pertamina and PT Ustraindo Petrogas, he said.

He did not name the owner of Ustraindo but Pertamina's sources said it was owned by Praptono H. Hupojo, a relative of Soeharto's late wife.

"We upgraded the preliminary investigation into the four cases to a full investigation on Nov. 15," Marzuki said in a hearing with the House of Representatives' Commission VIII, which oversees mines and energy affairs.

He said his office found irregularities in the signing of the four TACs that led to state losses of some US$18.99 million in total.

The TAC scheme was created by Pertamina to help local businessmen who mostly do not have the financial capability to finance oil and gas exploration activities. Under the contract, Pertamina gives its wells, which have already proven reserves, to local businessmen for exploitation.

Pertamina signed the four TACs between 1992 and 1993 for its oil fields in Pendopo, South Sumatra; Jatibarang in West Java; Prabumulih in South Sumatra; and Bunyu in East Kalimantan.

Marzuki said that the TACs signed between Pertamina and Ustraindo had terms which violated existing regulations on TACs.

Under its contract, Ustraindo were freed from paying costs, which under TAC regulations should be borne by Ustraindo.

Instead, Pertamina had to pay the costs, which totaled $18.99 million.

Marzuki said thus far his office had examined 74 of the 159 contracts and project proposals reported by Pertamina to the government. Of the 74 examined cases, 52 contained no indications of alleged corruption, collusion and nepotism practices.

The 52 cases, he said, were either still in the form of proposals or memorandum of understandings, that were unable to inflict losses to the state.

Some others were oil and gas business licenses, which Pertamina granted to private companies that could not cause leakages in state income, he said.

However, the Attorney General's office found 22 contracts that might have been awarded through corrupt practices, 17 of which were still being probed.

Of the remaining five, so far only the cases involving Ustraindo's contracts had been upgraded to a full investigation, Marzuki said.

The Attorney General's Office also said it had not found enough evidence yet to launch a full investigation into the high- profile corruption case of the Balongan oil refinery.

The US$2.4 billion refinery in Indramayu, West Java, was built from 1990 to 1995 by a consortium of contractors led by Foster Wheeler of Britain.

The cost of the project was allegedly marked up, with legislators citing the realistic cost to be around $1.6 billion.

Marzuki said that the initial indication of corruption in the Balongan project, was the various estimations of its realistic value.

Parties involved in the development of the project gave five different cost estimations, ranging from $938.6 million to $1.999 million, he explained.

But he said the various cost estimations of the project's realistic value could not be classified as preliminary evidence of corruption.

According to him, a physical audit of Balongan's equipment and structure is required to assess its real value.

Marzuki further reported his office's progress in investigating alleged corruptions in the Paiton I independent power plant project.

He said that although his office found possible irregularities, they were too weak for his office to launch a full investigation.

State electricity company PLN suspects mark up practices in in the development of the Paiton I project, that eventually caused PLN to pay Paiton higher than average power prices.

The Paiton I power plant is being operated by a consortium of PT Batu Hitam Perkasa, the American-based Mission Energy Company International and General Electrics, and Japan's Mitsui & Co. (bkm)