Last hurdle cleared in Tangguh talks
Fabiola Desy Unidjaja, The Jakarta Post, Jakarta
A BP Plc.-led consortium has finally dropped its demand to include regental administrations in the "government acts" clause of the Tangguh construction contract, over concern that in future there would be the possibility of wider autonomy being given to regencies, an official says.
"The consortium agrees that we do not include the regental administration in the government act clause as previously demanded," Ministry of Energy and Mineral Resources director general of oil and gas Iin Arifin Takhyan told The Jakarta Post on Sunday.
He claimed that in the latest negotiation last week, BP was satisfied with the government's explanation that the revised Autonomy Law had given some power back to the governors.
Previously, the energy and mineral resources ministry had negotiated with the finance ministry for a possible financial risk guarantee for BP, should there be a change in government policies that prevent the plant from fulfilling its supply commitments.
The Tangguh project construction -- to be conducted by a consortium comprising of BP, Kellog Brown & Root, JGC Corporation and PT Pertafenikki Engineering -- hit a snag in the ongoing debate on the "government act" clause.
The request was due to various problems faced by foreign investors since the implementation of regional autonomy, which gave more power to the regencies since 2001.
Revised Law No. 32/2004 on regional autonomy has provided wider authority to governors to oversee decisions made at the regental and municipality levels and limits the power of regents and mayors.
The ongoing debate was brought to President Susilo Bambang Yudhoyono late last month before the consortium finally agreed to drop the request.
However, there is another problem to be settled before both parties can close the deal. Iin said the two parties still had differences over BP's request that the government pay the interest resulting from claims paid by BP to buyers should the firm suffer financial losses.
"We are still working on their demand for interest resulting from the time difference between BP's payment of claims to buyers and the government's reimbursement to BP," Iin said.
He said he hoped this problem would be the last.
"We want the project to move forward and negotiations are expected to finish as soon as possible."
Tangguh, located in Papua, is Indonesia's third LNG plant after Arun in Aceh and Bontang in East Kalimantan. Tangguh is expected to make up for the country's declining gas projects.
The consortium is to cover some US$2 billion of the total $5 billion estimated cost of the project, while the rest will come from lenders.