House demands second look at LNG contract

House demands second look at LNG contract

JAKARTA (JP): Several legislators have called on state oil and gas company Pertamina to investigate alleged irregularities in the awarding of the contract for the construction of a liquefied natural gas (LNG) train in East Kalimantan to a company owned by tycoon Mohamad "Bob" Hasan.

The members of the House of Representatives' Commission VIII for mines and energy said they suspected PT Inti Karya Persada Teknik (IKPT) obtained the contract thanks to the connection of the owner with then president Soeharto.

"Aside from the fact that the contract was awarded without competitive bidding, there is a suspicion that the cost of the project was marked up significantly," commission head Irwan Prayitno was quoted by Antara as saying on the sidelines of the hearing between the commission and Pertamina on Tuesday.

The LNG project in question is the eighth train, or Train H, at the LNG complex in Bontang, East Kalimantan, owned by PT Badak NGL Co.

Pertamina inaugurated the new LNG train on Monday.

Aside from Train H, IKPT has also built Train F and G at the country's largest LNG complex. The train has the production capacity of 2.9 million tons of LNG per year.

Irwan accused IKPT of marking up the cost of the project by US$300 million to $794.4 million.

In comparison, he said, Malaysia spent $902.2 million to build three trains in Bintulu which have a total production capacity of nine million tons per year.

Pertamina's president Martiono Hadianto said he did not have any misgivings about plans to investigate the alleged corruption.

He noted that Pertamina's foreign oil and gas contractors, which co-own the LNG plant and were highly sensitive to corrupt practices, thus far made no complaints about the selection of IKPT.

Meanwhile, Pertamina's processing director Samto Utomo denied any mark-up practices in the project.

In a written statement distributed during the hearing, Pertamina projected net profit at Rp 2.2 trillion ($305 million) for the first half of the fiscal year 1999/2000.

It projected oil output at 14.7 million barrels, gas output at 112.9 million cubic feet and fuel output at 125.8 million barrels during the period.

It expected to export 33.49 million barrels of oil and 13,906 tons of LNG in the period.

The government's subsidy for fuel is estimated at Rp 14.1 trillion in the period. (jsk)