Caltex 'made dubious $190m business deal'

Caltex 'made dubious $190m business deal'

By Johannes Simbolon

JAKARTA (JP): PT Caltex Pacific Indonesia oil company has
awarded a US$190 million cogeneration plant project to a company
linked with Faisal Abda'oe, former president of state oil and gas
company Pertamina, without competitive bidding, a Pertamina
official disclosed on Friday.

The Pertamina executive, who insisted on anonymity, told The
Jakarta Post that PT Mandau Cipta Tenaga Nusantara, which is
building a 300-Megawatt cogeneration plant in Riau province to
support Caltex's oil operation, is partly owned by Faisal's son,
Reza Abda'oe, through PT Nusagalih Nusantara.

Caltex's spokesman Ketut Irawan first confirmed the Pertamina
official's statement but he later recanted.

"I first thought he was a co-owner of Mandau Cipta because I
often saw him (Reza) in the company's office. But upon checking,
I found that the company's statutes do not mention his name,"
Ketut told the Post.

Ketut said PT Nusagalih owned only 5 percent of Mandau Cipta
with the remainder being held by American companies Chevron (47.5
percent) and Texaco (47.5 percent). Both are shareholders in
Caltex.

But according to the Pertamina official, Mandau Cipta is 20
percent owned by Nusagalih, which is controlled by Faisal and the
Serangan Umum 1 Maret Foundation.

The foundation was formerly chaired by Faisal and is linked to
former president Soeharto.

Ketut confirmed that the project was awarded to Mandau Cipta
without competitive bidding in August, 1997 when Faisal was still
Pertamina president.

"But the deal was done with prior approval from Pertamina and
was processed through all the necessary channels," he asserted.

Ketut said Caltex and Pertamina signed a memorandum of
understanding (MOU) on Aug. 26, 1997 to appoint Mandau Cipta to
develop the cogeneration plant, but he refused to name the
Pertamina official who signed the MOU.

Faisal served as Pertamina's president for two periods from
1988 to Jan. 1998.

Ketut denied that Faisal is a partner in Nusagalih but he
confirmed that the Serangan Umum 1 Maret foundation initially had
a stake in the company.

"But a businessman, Harsudi Supandi, later took over the
foundation's stake and became the controlling shareholder in the
company," he added.

Analysts said the Duri cogeneration plant project would
decrease the government's earnings from Caltex's oil operation
because it would raise Caltex's production costs.

Under the production sharing contract (PSC), the government is
entitled to 89.7 percent of the incomes from the sales of
Caltex's oil after the contractor recovers its expenditure for
oil production.

The cogeneration plant's revenues will be shared by Caltex's
holding companies but not the government since it does not have
any stake in Mandau Cipta.

Analysts argued the government could maintain the level of its
earnings from Caltex's oil production if the cogeneration plant
was built by Caltex, given PSC's stipulation that the government
holds titles to all production facilities built by Caltex.

Caltex accounts for about 60 percent of the country's oil
output of 1.28 million barrels per day (bpd).

The country's largest cogeneration plant, scheduled for
completion in 2000, will supply power and steam to support oil
production at Caltex's steamflood operation in Duri.

Cogeneration is a fuel-efficient and environmentally friendly
process that will produce electricity and steam simultaneously
from natural gas.

Different from a common gas-fired power plant which can only
turn 30 percent of the gas into power and discharges the rest in
wasted energy, a cogeneration plant can produce power as well as
further process most of the wasted energy into thermal energy for
heating and cooling needs.

The steam that will be produced at the Duri cogeneration plant
will be pumped into the Duri oil wells to force crude oil flow
out.

The Duri cogeneration plant will be fed with natural gas being
piped from the Corridor block owned by Canada's Gulf Resources in
Grissik, Musi Banyuasin, South Sumatra.

The plant will be operated by Amoseas Indonesia, a Caltex
sister company, which will supply power to Caltex at rates well
below those charged by most private power companies in Java and
Sumatra.

-- Johannes Simbolon