Chiyoda-Mitsubishi wins LNG plant design contract

JAKARTA (JP): State oil and gas company Pertamina and its American contractor Atlantic Richfield Company (ARCO) awarded the contract to make the blueprint for the Tangguh liquefied natural gas (LNG) in Irian Jaya to Japanese consortium Chiyoda- Mitsubishi, Pertamina said on Thursday.

The Japanese consortium beat American firm Bechtel in the final phase of the bidding process for the so-called "front-end engineering design" (FEED) contract.

"The contract award to Chiyoda-Mitsubishi is one contract in multiple FEED strategy selected by Pertamina and ARCO to promote competition and to achieve a competitive project cost," Pertamina said in a statement.

Initially, there were seven companies participating in the bidding. But only Chiyoda-Mitsubishi and Bechtel passed the first phase of the selection process conducted by Pertamina.

Chiyoda-Mitsubishi then won the final phase of the bidding.

The five companies who lost the first phase of the selection process are Inti Karya Persada Teknik (IKPT) and its American partner Kellog Brown & Root; French firm Technip; Japanese firm JGC and its local partner Pertafinikki; American firm Flour Daniel and its partner Black and Veatch; and British firm Foster Wheeler and its local partner Tripatra.

IKPT, controlled by Mohammad Bob Hasan, a close friend of former president Soeharto, has built several LNG trains in Badak, East Kalimantan, and had been appointed to design the Tangguh project during the Soeharto era. But, the contract was revoked after the resignation of Soeharto in mid-1998.

Documents obtained by The Jakarta Post reveal Chiyoda- Mitsubishi proposed a design based on Air Products and Chemicals Inc.'s (APCI) propane pre-cooled-C3/MR technology, while Bechtel proposed a design based on Philip's optimized cascade process technology.

APCI's technology is being used in LNG plants in Arun, Aceh and Badak.

The documents further say Chiyoda submitted the best technical proposal and the best commercial terms with a bid price of US$2.6 million, as against the owners' estimated price of $10 million. The company will work on the FEED in Indonesia.

Bechtel submitted a bid of $8 million.

Most analysts praised the bidding process as having been conducted transparently.

"Pertamina has demonstrated its commitment to fair and transparent business practices through the process used to award Tangguh FEED," Djoko Subekti, executive coordinator of Pertamina's refinery projects, said.

"The result of the process speaks for itself: a world-class contractor conducting the work in Indonesia using local technical expertise at an extremely competitive price," he added.

The Tangguh LNG project will be supplied with natural gas from Wiriagar, Berau and Muturi areas which contain more than 14 trillion cubic feet of proven gas reserves. The gas fields are owned by ARCO, BG Exploration and Production and several partners.

Pertamina, ARCO and partners plan to build a two-train LNG plant worth $1.5 billion with a annual output of 6 million tons of LNG.

They have yet to find buyers for the LNG, but they have been doing preparatory work for the project to ensure that the LNG plant can be constructed quickly once they find one. (jsk)