Pertamina annuls contract with IKPT for LNG project
Pertamina annuls contract with IKPT for LNG project
JAKARTA (JP): State oil and gas company Pertamina has annulled
a contract to build a giant liquefied natural gas (LNG) plant in
Irian Jaya awarded to PT Inti Karya Persada Teknik (IKPT), a
company controlled by former president Soeharto's golfing partner
Mohamad "Bob" Hasan.
Pertamina's outgoing president Soegianto said on Wednesday
that the contract, which could have been worth over US$500
million, was annulled because it had not been awarded through a
competitive bidding process.
"Pertamina is currently drawing up the terms of reference for
an open tender for the LNG plant project," Soegianto said in
response to a question raised during a hearing with House of
Representatives Commission V for mines and energy.
Legislator Priyo Budi Santoso of the Golkar faction asked how
IKPT had managed to obtain the contract with such a long time
remaining before the project was due to start.
The contract to develop the Soeharto Tangguh gas center was
awarded to a joint venture involving IKPT, Atlantic Richfield
Company (ARCO) of the United States, and British Gas (BG).
The plant will be fed with natural gas from three production-
sharing blocks in the province -- the Muturi Block operated by
British Gas, and the Wiriagar and Berau blocks operated by ARCO.
The Muturi Block is run as a joint venture between British Gas
and Cairns Ltd, a subsidiary of Malaysia's Genting Bhd.
ARCO operates the Berau block in partnership with Nippon Oil
and Kanematsu from Japan, and the Wiriagar block in partnership
with Kanematsu.
ARCO and British Gas have also certified gas reserves of 14.4
trillion cubic feet (tcf) in the Tangguh area of the remote
province. The area also has another 3.9 tcf of probable gas
reserves and 3 tcf of possible gas reserves.
However, buyers have yet to be found for the reserves in
Tangguh.
Minister of Mines and Energy Kuntoro Mangkusubroto said the
government would allow IKPT to participate in a future tender for
the project.
"The project should be awarded through an open tender. If IKPT
then wins the project, that is their good luck," Kuntoro said at
the same hearing.
No information was available regarding the value of the
contract, but analysts estimate it could exceed $500 million.
IKPT was previously appointed by Pertamina to build three LNG
trains to operate in Bontang district, East Kalimantan. Contracts
for the construction of the three trains were worth $522 million,
$511 million and $708 million respectively.
Gas pipeline
At the hearing, Kuntoro also said that he had instructed
Pertamina to be fair in awarding the contract for construction of
a 650-kilometer underwater natural gas pipeline connecting gas
fields in West Natuna in the South China Sea to Singapore, as
stated in Presidential Decree No.16/1994.
Asian contractors have complained that the terms of the
current tender, which was drafted by Pertamina's West Natuna gas
field contractors -- Britain's Premier Oil, Canada's Gulf
Resources, and Conoco from the United States -- give an unfair
advantage to European and American companies.
Among their objections to the proposed tender is a clause
which prevents companies without previous experience of managing
similar projects from winning the contract. No Asian companies
meet this requirement.
"The project will go out to tender in January. We have
instructed Pertamina not to include any unrealistic terms,"
Director General of Oil and Gas at the Ministry of Mines and
Energy Soepraptono Soeleiman explained.
Kuntoro also denied rumors that Indonesia intends to leave the
Organization of Petroleum Exporting Countries (OPEC) in protest
at the organization's inability to reverse the downward trend in
world oil prices.
"We don't have any intention of leaving OPEC," Kuntoro said.
(jsk)