McDermott wins Natuna gas pipeline contract
JAKARTA (JP): State oil and gas company Pertamina has approved the West Natuna consortium's selection of PT McDermott Indonesia for the construction of the underwater pipeline to transport natural gas from the Natuna islands to Singapore.
Spokesman for Pertamina's foreign contractors management body (BPPKA) Sidick Nitikusuma confirmed Monday evening that Pertamina president Martiono Hadianto had approved McDermott's contract on May 14.
"That's right. Pak Martiono has approved the contract," Sidick told The Jakarta Post via telephone.
According to Sidick, Martiono approved the West Natuna Gas Group's decision to award the contract to McDermott after learning that the March bidding in which McDermott won the project was held transparently and consistent with the existing regulations.
McDermott offered the lowest bid of US$335 million, beating out four competitors, including ETPM of France, Saipem of Italy and Nippon Steel of Japan.
McDermott signed a deal with the consortium on Friday in Jakarta, Sidick said.
The West Natuna Gas Group comprises Conoco Inc. of the United States, Canada's Gulf Resources and Britain's Premier Oil.
The pipeline will be jointly constructed by McDermott Indonesia and McDermott Singapore's unit McDermott Asia Pacific.
Pertamina had long delayed making its final approval on the contract following strong criticism from various quarters, including legislators, over the result of the tender held by the consortium.
Legislators repeatedly called for retendering of the project, arguing that McDermott did not deserve the project due to its partnership with former president Soeharto's golfing partner Mohammad Bob Hasan who was charged with corruption, collusion and nepotism during Soeharto's 32 years of presidency.
But, Pertamina rejected the legislators' plea, saying that the tender held by the consortium was transparent and in line with existing regulations.
Sources said Martiono and several top government officials had put pressure on McDermott to end the partnership with Bob Hasan to meet the legislators' demands.
Secretary-General of Ministry of Mines and Energy Djoko Darmono confirmed on Monday that McDermott eventually bowed to the pressure.
"Bob Hasan has no longer had any stakes in PT McDermott Indonesia since two weeks ago. You can check for yourself with (lead consortium) Conoco," Djoko said.
Early this year, Pertamina signed an agreement to sell natural gas from Premier, Conoco and Gulf gas fields in the South China Sea to Sembawang Gas (SembGas), for 22 years starting from the year 2001. The gas supplies could be extended for another five years.
Under the contract, SembGas will import 325 million cubic feet of gas per day (MMSCFD) to feed its power plant and petrochemical plants.
SembGas is a consortium led by Sembawang Engineering and Construction and includes Singapore's Tuas Power, Tractebel SA of Belgium and Singapore's Economic Development Board Investments Pte Ltd.
The gas sales will reportedly generate a total revenue of $7.5 billion for 22 years, $2.4 billion of which -- or $180 million per year -- will go to the government in taxes and profit shares.
The West Natuna consortium said earlier they would invest $1.5 billion to develop gas fields, build transportation facilities and construct pipelines.
Pertamina has also been negotiating with Singapore Power for a supply of natural gas from Central Sumatra to the country through an underwater pipeline starting from 2001.
Indonesia is currently the world's largest exporter of liquefied natural gas (LNG). Most LNG exports are directed toward South Korea, Japan and Taiwan. (jsk)