McDermott tipped to win W. Natuna project

JAKARTA (JP): The West Natuna gas consortium announced on Thursday that PT McDermott Indonesia, the Indonesian unit of the American contractor McDermott Corporation, is a strong contender for the construction of a 650-kilometer underwater pipeline to channel natural gas from west of the Natuna islands to Singapore.

Conoco Indonesia's vice president for development and relations A.R. "Dudung" Natanegara said during the final commercial tender that the McDermott bid was the lowest at US$335 million for the megaproject.

"We have yet to finish evaluating the company's proposal. But it has a high probability of winning the project, given the fact it's (offer) was the lowest (received) during the bidding," Dudung said.

The United States-based Conoco is one of the consortium members, which also include Britain's Premier Oil and Canada's Gulf Resources.

McDermott's competitors in the bidding are ETPM of France, Japan's Nippon Steel and Saipam of Italy. The companies quoted the cost of the project at $382 million, $415 million and $372 million respectively.

McDermott's affiliation with former president Soeharto's golfing partner Mohammad "Bob" Hasan is widely known.

Gulf Indonesia Resources' administration vice president Supramu Santosa, said the West Natuna Group is currently evaluating McDermott's proposal to check whether there are "provisions in the price proposal which might increase the real cost of the project".

Evaluation results are expected in seven to 10 days.

State oil and gas company Pertamina will further evaluate the bids for between two weeks and one month.

"Pertamina will make a final decision on the winner of the project," Supramu said, adding Pertamina had the right to override the consortium and select a different contractor.

Dudung and Supramu refused to respond to questions concerning McDermott's affiliation with Hasan and whether the connection will undermine the company's bid.

"The right to make a political decision lies with Pertamina. We only evaluate the bidders's technical ability and commercial proposal," Dudung said.

Pertamina has canceled most of its contracts with Bob Hasan as part of a company drive to eliminate corruption, collusion and nepotism.

Early this year, Pertamina signed an agreement to sell natural gas from the Premier, Conoco and Gulf gas fields in the South China Sea to Sembawang Gas (SembGas), for 22 years starting from the year 2001.

The bidding process for the project has, however, sparked controversies following the failure of two bidders, Allseas of the Netherlands, and Hyundai Heavy Industries of South Korea, to pass the technical evaluation phase.

Several legislators, including Golkar representatives Priyo Budi Santoso and Joeslin Nasution, accused the consortium of unfairly pushing both companies aside, by engineering bidding terms which were difficult for both companies to fulfill.

They said the bidding terms were engineered in such a way that the project could be won by McDermott, Saipam, ETPM and Nippon Steel -- four companies which the legislators said had formed a cartel-like cooperation in the gas pipeline world market.

In response to the outcry, Director General of Oil and Natural Gas Soepraptono Soelaiman, asked the consortium to eliminate unfair bidding terms.

Dudung said the consortium had relaxed several bidding terms in response to the request, including the elimination of the requirement of prior building experience of more than 500 kilometers of underwater pipeline. The requirement was changed to prior experience of building a 100-kilometer pipeline.

However to meet deadlines, the consortium required bidders to be capable of building the underwater pipelines at the speed of 2.5 kilometers per day.

Hyundai has no track record of building pipelines at that speed, Dudung said.

According to Dudung, the consortium has a speed-of-work requirement, because SembGas will fine the consortium between $500,000 and $1 million per day if it fails to deliver the gas on schedule, starting April 15, 2001.

Dudung and Supramu said the consortium was prepared to explain the case to the House of Representatives. (jsk)