House to rule on McDermott contract soon

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)