Graft probe of Balongan project nearing completion
JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto has said officials looking into alleged graft in the development of the US$2.45 billion Balongan refinery in West Java would wind up their investigation by October.
The Attorney General's Office and the Development Finance Comptroller (BPKP) started the investigation in June at the request of Kuntoro and the House of Representatives in response to allegations that the developers might have marked up the project's value.
"Don't worry. The investigation has not been stopped. It's still going on. We plan to have the results by October," Kuntoro said in a weekly news conference on Friday.
The Balongan refinery in Indramayu was built by the state oil and gas company Pertamina through Japan's JGC Corporation and Foster Wheeler of America from 1990 to 1995.
Project financing was provided by Java Petroleum Investment Co. Ltd., which is a consortium grouping Mitsui Corp. Marubeni Corp. Sumitomo, Itochu and 20 Japanese bankers.
The refinery, which can process 125,000 barrels per day (bpd), has two production units: a crude distillation unit (CDU), which produces naptha, kerosene, gas oil and residue, and a residue catalytic cracker (RCC), which turns out liquefied petroleum gas (LPG) and Premium, Super TT and Premix gasoline.
The refinery's RCC unit has reportedly experienced technical problems on several occasions, raising suspicions that the plant was not constructed to specifications.
Several legislators, including Djusril Djusan of the majority Golkar party, have claimed the project's real value is about US$1.6 billion. They have accused several top Pertamina and government officials of embezzling $800 million from the project by marking up its value to $2.45 billion.
Aside from the legal audit being carried out by the Attorney General's Office and BPKP, the ministry and Pertamina are conducting a technical audit of the refinery.
Kuntoro also said the ministry had asked the Attorney General to probe only Balongan out of all of Pertamina's operations.
Pertamina has said that it awarded 140 contracts to Soeharto's family and cronies during the former president's long tenure.
Kuntoro said an investigation into the 140 projects would be left to Pertamina and that the company would decide if it should discontinue the contracts to improve efficiency.
Analysts believe that Soeharto's family and cronies had obtained the contracts through collusion, which many argue is one of the main reasons behind Pertamina's inefficiency.
Kuntoro also said the government had yet to investigate alleged markups by PT Inti Karya Persada Teknik (IKPT) in the development of its liquefied natural gas (LNG) plants in Bontang, East Kalimantan.
IKPT, controlled by Soeharto's close friend Mohammad "Bob" Hasan, has built Train F and Train G in the country's largest LNG complex. It is currently developing Train H.
IKPT did not win the projects through competitive bidding.
According to local reports, IKPT reported the costs for Train G's development, completed early this year, to be above $950 million, while it said Train H cost $1.13 billion.
"It is difficult to investigate the case because the projects are too complex and we can't find any comparisons to start an investigation and to prove the markup allegations," Kuntoro said.
Kuntoro promised that the government would have an open bidding system for the development of its next LNG plant. (jsk)