Pertamina denies corruption allegations

Pertamina denies corruption allegations

Fitri Wulandari, Jakarta

State oil and gas company PT Pertamina dismissed on Sunday
allegations it had entertained a number of legislators on tours
to Hong Kong and South Korea in order to gain their approvals for
the planned sale of two giant oil tankers.

Pertamina's spokesman Hanung Budya Yukyanta confirmed the
legislators were touring the two countries but it was funded by
the state rather than Pertamina.

The tour was aimed at allowing the members of the House of
Representatives' Commission VIII, which oversees energy affairs,
to get information from South Korean shipbuilder Hyundai Heavy
Industries, which is building two Very Large Crude Carriers
(VLCC)

"The visit, which started on June 13 is part of transparency
in the process to invest in the two VLCCs. It is part of the
implementation of good corporate governance," Hanung said in the
press statement.

The legislators also visited Hong Kong to be debriefed by
Goldman Sachs, Pertamina's consultant for the planned sale of the
two tankers, on the latest situation of the global tanker market,
Hanung said.

The tour is the latest issue surrounding the controversial
sale of the company's two giant oil tankers.

Kompas reported on Sunday that 30 legislators of Commission
VIII, some with their spouses, accompanied by two House members
and a senior official of Pertamina, took part in the tour. But,
when contacted by cellular phone on Saturday, some of the
legislators insisted they were still in Indonesia, rather than in
Korea or Hong Kong.

Head of Pertamina's labor union Otto Gewa Diwara insisted that
Pertamina entertain the legislators so that they would not block
the planned sale of the two tankers.

Under the leadership of the former president Baihaki Hakim,
Pertamina decided to buy two VLCCs for a total of US$130 million
in 2002, each with a capacity of 260,000 deadweight tons and a
capacity of 2 million barrels of crude. The tankers are scheduled
to be finished next month.

Baihaki said by owning the two tankers, Pertamina would save
fuel transportation costs by up to $7 million a year.
Furthermore, it would provide Pertamina a stronger bargaining
position in dealing with tanker owners, who often force Pertamina
to pay very high leasing fees.

However, the new management, under president director Ariff
Nawawi, has decided to sell the two tankers, citing cash flow
problems, while arguing it was cheaper to transport crude oil and
other fuel using leased tankers than the ones owned by Pertamina.

Operating a VLCC would cost Pertamina $45,000 a day while
leasing a similar carrier would only be $20,000 a day, Ariffi
said.

However, consultant Japan Marine has stated that the operating
cost for a VLCC would be $27,697 per day and an audit by the
State Comptroller (BPKP) has also said the purchase of the
tankers was on "the right track".

The decision has sparked suspicions that the new management
had hidden motives behind the planned sale, including that they
want to continue enjoying commissions from tanker owners.
Pertamina was known as one of the most corrupt companies during
former President Soeharto's administration.

Hanung insisted on Sunday the decision to sell the tankers is
a strategic one considering shipping is not the company's core
business. Cash flow problems are also a factor behind the
decision.

"As a limited liability company, Pertamina now focuses on
gaining profit. The funds for the sale will be used to improve
and develop core business apart from strengthening the domestic
tanker fleet," he said.

The sale will be conducted based on cash-on-delivery. The
prices will have to be above market price, Hanung said.

Pertamina operates 143 tankers. It owns 30 tankers while the
remainder are leased.