Natuna gas project management

Natuna gas project management

Commission V of the House of Representatives (DPR) has
recommended that the government cancel PT McDermott's contract to
construct the Natuna gas pipeline, worth US$335 million, as
reported in Bisnis Indonesia and Media Indonesia on Aug 27.

This recommendation must be considered, yet at the same time
it must be taken into account that the project must be
implemented according to the schedule and technical
specifications already stipulated and at the lowest cost. The
wrong choice must not be made because we are too sensitive to the
ghosts of corruption, collusion and nepotism as this could cause
losses of $388.6 million for Pertamina and the government,
according to the report of Foreign Contractors Management Body
(BPPKA) head Gatot Karl Djoso Wiroyudo in Media Indonesia on Aug.
27.

Another $14.7 million would be lost in payment for the work
already done by McDermott as well as the cancellation fee. An
additional amount of $38 million would be added because the most
economic second bid totaled $373 million by PT Saspem Indonesia.
This would cause the additional loss of $52.7 million so that the
total losses, if the McDermott contract is canceled, would total
$421.3 million (approximately Rp 3.160 billion or six times
bigger than the amount involved in the Bank Bali scandal).

If these figures are correct and if, with reference to the
provisions in the contract and the general rules internationally
applicable, it is rather unlikely that Pertamina would sustain
these losses. If making an overall analysis it would seem that
Pertamina would be better off staying with the initial decision
of appointing PT McDermott as the winner of the contract. If not,
the financial losses may indirectly burden the Indonesian
people.

Bob Hasan's 18.5 percent share of PT McDermott should be
separately discussed to make sure that the project does not have
a vestige of corruption, collusion and nepotism. In this way the
implementation of the project could go forward.

The DPR and Pertamina must take into account the counter
argument levied by the area manager of PT McDermott Indonesia,
Howard J. Cleave, regarding the irregularities exposed by the
DPR. According to Media Indonesia and Bisnis Indonesia on Aug.
30, Cleave has suggested the involvement of an independent
auditor to assess the validity of the tender.

For this time (and the last time) we should give a concession
to the possibility of corruption, collusion and nepotism in order
to save Indonesia's people Rp 3.160 billion. In addition, we
would also be able to keep our promises to the foreign gas buyers
(through Singapore) so that Pertamina can continue to enjoy
foreign trust.

H. WISDARMANTO GS

Jakarta