House member finds fault with Natuna pipeline project

JAKARTA (JP): A legislator lambasted on Friday alleged irregularities in the bidding for the development of a 650- kilometer underwater pipeline to channel natural gas from the gas fields west of the Natuna islands to Singapore.

Joeslin Nasution of ruling Golkar party announced he did not believe that the consortium which owned the project -- the West Natuna Group -- would hold transparent bidding for the construction of the US$400 million pipeline.

He said the consortium had engineered bidding terms to give an advantage to a group of four contractors -- ETPM of France, Saipam of Italy, Nippon Steel of Japan and McDermott of the United States -- to win contracts despite the high cost of construction they charge.

He said South Korean contractors, including Hyundai and Daewoo, had high skills and had offered very competitive prices, but he said they would predictably lose the bidding due to unfair bidding terms.

According to the bidding terms, only contractors which have experience in building underwater pipelines of the same length qualify for the project.

The West Natuna Group consortium is made up of Britain's Premier Oil, Conoco of the United States and Gulf Resources of Canada.

The gas contractors will supply Singapore's SembGas for 22 years from 2001 with natural gas extracted from their West Natuna gas fields. The gas will be used to feed Singapore's power plants and petrochemical plants.

Pertamina signed the gas sales agreement on Jan. 15 this year.

Sales of the West Natuna gas will reportedly generate total revenue of about $8 billion over 22 years, $2.7 billion of which -- or $123 million per year -- will go to the government in taxes and profit sharing.

Another Golkar legislator, Priyo Budi Santoso, has on several occasions expressed similar concerns as Joeslin.

In response to the complaint, the director general of oil and gas at the Ministry of Mines and Energy asked the West Natuna Group to make the bidding terms more reasonable.

But the consortium has refused to change the bidding terms, arguing that the strict bidding terms were made to ensure the quality of the pipeline and to prevent penalties being applied by SembGas for supply problems.

"We didn't change the requirements and we communicated back to the ministry the reasons why the requirements were critical to the contract," Rab Speirs, president of Premier Oil Natuna Sea Ltd, a subsidiary of Premier Oil, said recently.

Speirs said the West Natuna Group had completed the technical evaluation of the bidders last year and it would invite the bidders for the commercial tender next week. (jsk)