McDermott tipped to win W. Natuna project

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)