Wed, 31 Mar 1999

Pertamina says no faults in Natuna pipeline tendering

JAKARTA (JP): State oil and gas company Pertamina said here on Tuesday it had not found any irregularities in the tender for the construction of a 650-kilometer underwater pipeline to supply natural gas from west of the Natuna Islands to Singapore.

The head of Pertamina's foreign contractor management body, Gatot K. Wiroyudo, said the body closely monitored the bidding process for the pipeline project to ensure it was in compliance with existing regulations.

"We have yet to receive the final result of the tender from the consortium. Thus far, we have found no irregularities in the bidding process. The tender has been carried out transparently and openly," he said.

The West Natuna gas consortium, which comprises United States- based Conoco, Britain's Premier Oil and Canada's Gulf Resources, recently announced that PT McDermott Indonesia, a subsidiary of American contractor McDermott Corporation, would most likely win the project.

Also bidding were ETPM of France, Japan's Nippon Steel and Saipam of Italy.

McDermott, which was affiliated with businessman Mohammad "Bob" Hasan, former president Soeharto's golfing partner, submitted the lowest bid for the project at US$335 million during commercial bidding last week. The consortium's estimated cost of the project was $427 million.

According to existing regulations, the result of the tender must be approved by Pertamina's president.

Minister of Mines and Energy Kuntoro Mangkusubroto earlier said he had ordered Pertamina to investigate allegations leveled by several members of the House of Representatives Commission V for mines and energy of irregularities in the bidding process.

Kuntoro said he would retender the project if irregularities in the bidding process were uncovered.

"If the bidding was conducted in conflict with existing regulations on tenders, we shall annul (the result). It's very easy (to do)," Kuntoro said.

The bidding process first sparked controversy following South Korea's Hyundai Heavy Industries' failure to pass the technical evaluation phase of the tender.

Several members of Commission V said Hyundai had the technical capability and was unfairly eliminated from the bidding. They charged that the consortium had manipulated the tender in favor of McDermott, ETPM, Saipem and Nippon Steel.

The legislators also claimed these four contractors had formed a cartel-like cooperation which would allow them to mark up the cost of the project.

They called on the government and Pertamina to order the consortium to allow Hyundai to take part in the bidding.

In response to the allegations, the consortium relaxed several of the terms of the tender, but refused to change the requirement which stated bidders had to have experience in building at least 2.5 kilometers of underwater pipeline per day -- experience Hyundai lacked.

This experience was necessary to ensure the project could be completed on time, the consortium said.

Gatot denied the legislators' allegations that McDermott, ETPM, Saipem and Nippon had formed any sort of cooperation.

"In view of the prices they proposed, we can say the four bidders have tightly competed with each other. Thus, allegations that the four contractors formed a cartel-like cooperation are implausible," Gatot said.

ETPM, Nippon Steel and Saipam submitted proposals of $382 million, $415 million and $372 million respectively.

Gatot also said in response to the legislators' protests the consortium recently reevaluated Hyundai, but Hyundai could not prove it had adequate technical ability to complete the project on time.

Gatot dismissed allegations the consortium treated Hyundai unfairly, citing the fact the consortium had awarded Hyundai a $130 million contract to develop their gas production platforms. (jsk)