Pertamina defends Natuna pipeline plan

JAKARTA (JP): State oil and gas company Pertamina denied on Monday the allegation that the West Natuna consortium had held an unfair tender to the awarding of the contract for the development of the underwater pipeline megaproject to channel natural gas from the gas fields west of the Natuna islands to Singapore.

Pertamina's head of foreign contractor supervision (BPPKA) Gatot K. Wiroyudo said the tendering process done by the consortium -- comprising Britain's Premier Oil, Canada's Gulf Resources and the United States' Conoco -- was transparent and in compliance with the existing regulations.

"We don't see any irregularities in the tendering process," Gatot said in a press conference attended by the representatives of the three Pertamina production sharing contractors.

Pertamina signed last month the gas sales agreement to supply Singapore's Sembawang Gas (SembGas) with natural gas extracted from the consortium's gas fields in the South China Sea for 22 years starting from 2001.

The natural gas will be channeled through a 650-kilometer underwater pipeline worth US$400 million linking the contractors' gas fields to Sakra island off Singapore.

Gatot said the consortium had completed the technical evaluation of the bidders and would hold definitive bidding later this month.

Several members of the House of Representatives, including Priyo Budi Santoso and Joeslin Nasution, have expressed their concerns over the tendering process for the construction involved in the pipelines.

They said the consortium had intentionally engineered the terms of the tender to disadvantage the Asian bidders.

The tender's terms which Asian companies complained about stipulated, among other things, that the contractors should have a track record of building at least three pipelines of the same length as the West Natuna pipeline over the past five years.

"All the Asian contractors participating in the bidding only have experience of building shorter pipelines. But, the requirements will exclude them despite the fact that they offer more competitive prices than the others," Priyo said.

Gatot said there were initially eight international engineering, procurement, construction (EPC) contractors which were interested in participating in the bidding, but two of them later backed off.

Only four of the bidders passed the technical evaluation conducted by the consortium Oct. to Nov last year.

"As part of the technical evaluation, we also visited the bidders' operation centers in their respective countries to see their technical capabilities," Conoco's vice president of development and relations AR Natanegara said.

Natanegara and Gatot however refused to name the four bidders that passed the technical evaluation.

But according to Joeslin, the four EPC contractors are France's ETPM, Italy's Saipam, Japan's Nippon Steel and the U.S.' McDermott.

"Hiding itself behind the current reform spirit, the consortium uses classical excuses like experience and the urgency of the project to favor the four contractors," Joeslin said.

"Behind it is a big, systematic and delicate corruption plan," he said.

Gatot said BPPKA had approved the strict bidding requirements made by the consortium given the high risk of the project and the penalty that would be imposed by SembGas on the consortium in case of gas supply problems.

"The consortium has to reduce the risk as much as possible," Gatot said, adding that the contractors had to finish the construction of the pipelines in 25 months, otherwise the consortium would face penalties from SembGas.

He said the bidding requirement did not specify the proportion of locally-made materials that had to be utilized by the bidders, but he said the use of such material will be considered a plus point for bidders. (jsk)