Fri, 09 May 2003

BP Migas under fire for 'irregular tender'

The Jakarta Post, Jakarta

The Upstream Oil and Gas Implementing Body (BP Migas), the country's top oil and gas regulator, has come under fire for selling government oil at a price deemed too low.

Some even suspect irregularities in the tender process.

Two Singapore-based trading companies Novaco and Goldmanor recently won a contract from BP Migas to buy condensate, a type of oil that is produced along with natural gas.

The firms will pay a premium of 10 U.S. cents per barrel of condensate above the so-called Indonesian Crude Price. Novaco will get 300,000 barrels of condensate produced by PT Badak NGL, the country's largest liquefied natural gas center in Bontang, East Kalimantan; while Goldmanor will purchase condensate from the Arun NGL project in Aceh.

The condensate will be sent a over six-month period which began this month.

But critics said that the price obtained by BP Migas was too low as state-owned oil and gas company Pertamina last year paid a premium of 30 U.S. cents per barrel.

"The government suffered a loss. If we were invited we would have won because we would have offered a 30-cent premium," Pertamina spokesman Ridwan Nyak Baik, was quoted by Bloomberg on Thursday.

This raised allegations that the tender process may have been tainted with irregularities. Industry analyst Kurtubi called on the government to cancel the contract, otherwise the state would suffer great losses.

The country produces around 100,000 barrels of condensate per day, of which some 85 percent belongs to the government. Some of the government's portion is being exported.

This is BP Migas' first experience in selling government condensate. Previously, Pertamina assumed this marketing role. It was transferred in 2001 following the enactment of the new oil and gas law.

There is now a suggestion that the authority to sell condensate should be handed back to Pertamina.

But BP Migas marketing official Djoko Arsono maintained that the tender process was conducted in a transparent manner.

The regulatory body initially said that there were five bidders participating in the tender including Pertamina, Mitsui Co., Concord Energy, Novaco and Goldmanor.

But the agency retracted this statement on Thursday after Pertamina denied participating in the bid.

Pertamina admitted that its Singapore-based subsidiary Petral was invited to join the tender at the last minute on April 17. But because of the lack of preparation, Petral decided not to take part in the tender.

Minister of Mineral Resources and Energy Purnomo Yusgiantoro was expected to meet with BP Migas' top officials on Friday to seek clarification of the issue.