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)