House to rule on McDermott contract soon

JAKARTA (JP): The House of Representatives will rule next week on the proposed cancellation of the contract won by construction company PT McDermott Indonesia for the development of an underwater gas pipeline from west of the Natuna Islands to Singapore.

Marzuki Achmad, head of House Commission V with supervision including mines and energy, said on Tuesday the decision would be reached after state oil and gas company Pertamina provided requested details on the awarding of the tender and ramifications of its possible cancellation.

"The commission calls on Pertamina to provide complete data on the awarding of the contract to McDermott, the bidding procedures for the project and the consequences of the cancellation of the contract," Marzuki said at the conclusion of the hearing between the commission and the state company.

Pertamina's president Martiono Hadianto said the company would provide in a week the data and also a report analyzing the commercial and legal consequences of the cancellation of the contract.

"The consequences include the possible loss of the foreign investor confidence in our country," Martiono said.

Several legislators earlier called on Pertamina to revoke the contract and offer it for retender because they said McDermott was ineligible due to its ties to timber baron Mohamad "Bob" Hasan, a close associate of former president Soeharto.

They said the company's connection to Hasan, who served as its commissioner, almost ensured it was involved in corruption, collusion and nepotism during the Soeharto regime.

Defenders of McDermott Indonesia, a subsidiary of American marine construction firm J Ray McDermott SA, say it won the tender for development of the US$335 million 650-kilometer gas pipeline in open and transparent bidding.

The pipeline will supply natural gas from the gas fields owned by the West Natuna Gas consortium in the Southeast China Sea to Singapore for 22 years starting in 2001.

The consortium comprises three of Pertamina's production sharing contractors -- Conoco Corp. of the United States, Premier Oil of Britain and Gulf Resources of Canada.

Pertamina approved the selection of McDermott for the project last May, but the decision drew immediate condemnation.

Legislator Priyo Budi Santoso, who has been most critical of the company, called on Pertamina to review the selection of McDermott and retender the project.

He said McDermott could take on the project only if it was prepared to return funds it collected from the country's oil and gas industry through mark-up practices.

At Tuesday's hearing, most commission members voiced support for the revocation of the contract.

But some legislators said the tender was held in an open and transparent manner. They also said the public should respect Hasan's "civil rights".

Under pressure from Pertamina, Hasan, who owns a 18.46 percent share in McDermott Indonesia, has reportedly retired as commissioner and put his stake up for sale.

The commission agreed during the hearing to urge Pertamina to acquire Hasan's stake.

It also called on Pertamina "to put political aspects and appropriateness into considerations", in addition to legal concerns, in appointing companies for projects in the country's oil and gas industry to avoid similar controversies in the future.

Martiono fended off reporters' questions after the hearing.

He yelled to company spokesman Ramli Djaafar, "Spokesman, take care of these reporters" as he got into his car and left. (jsk)