Pertamina told to check contract irregularities

Pertamina told to check contract irregularities

JAKARTA (JP): Minister of Mines and Energy Kuntoro
Mangkusubroto has called on state oil and gas company Pertamina
to check possible irregularities in oil and gas contracts awarded
to foreign companies in joint ventures with former president
Soeharto's family and cronies.

"Pertamina should check if the contracts contain irregular
clauses regarding production splits between the government and
contractors, taxation or contract duration," Kuntoro said on
Friday.

He said if no "irregular clauses" were found in the contracts,
the government would not interfere in the deals, including the
acquisition of shares owned by Soeharto's family and cronies by
their foreign partners.

But, he said, if the contracts contained irregular clauses
that caused losses for the government, the government would take
over the shares owned by Soeharto's family and cronies and ask
foreign contractors to deal with the government rather than
Soeharto's family and cronies in any possible share acquisitions.

"The foreign contractors should give the payment to the
government if they want to buy shares which smack of KKN,"
Kuntoro said at a weekly press conference.

KKN is the Indonesian acronym for corruption, collusion and
nepotism.

Several foreign contractors have acquired or are seeking to
acquire the shares owned by Soeharto's family and cronies in
their joint ventures in order to comply with Pertamina's advice
to sever such ties.

Pertamina's director of exploration and production, Priyambodo
Mulyosudirdjo, has said that the advice was given to foreign
contractors to prevent their operations from being troubled
because of the involvement of Soeharto's family and cronies in
their companies.

Atlantic Richfield Indonesia Inc. (ARII), a subsidiary of
United States energy company Atlantic Richfield Company (ARCO),
and its partner British Petroleum have taken over the 10 percent
stake owned by the Bimantara group in a production sharing
contract (PSC) for the Kangean block in East Java. Bimantara is
linked to Soeharto's son Bambang Trihatmodjo.

ARII president Leon Codron earlier said that the company had
given Bimantara an option to buy a 10 percent stake in the block,
but Bimantara never exercised the option.

Codron cited a clause in PSC contracts awarded from the late
1970s saying that foreign oil and gas contractors had to offer
national companies an option to buy a 10 percent stake in the
contract areas at the beginning of production.

Under such contracts, Pertamina has the right to appoint a
company to buy the shares, and if the company does not exercise
the option within three months the option is eliminated.

"Bimantara had been given the option to buy our shares but it
has never exercised that option," Codron explained.

Unocal Indonesia Company, a subsidiary of U.S. energy company
Unocal Corp., is seeking to buy the 10 percent stake owned by PT
Nusamba in the Rapak and Ganal PSC block in East Kalimantan.
Nusamba is linked to Soeharto's golfing partner Muhammad "Bob"
Hassan.

U.S. company Mobil Corp., through its Australia-based
subsidiary Ampolex (CEPU) Pty Ltd., is also seeking to acquire
Humpuss Patragas' 51 percent stake in the Cepu block bordering
Central and East Java. Humpuss is controlled by Soeharto's son,
Hutomo Mandala Putra, also known as Tommy.

Kuntoro said that thus far Pertamina had only found irregular
clauses in the contract awarded to Humpuss Patragas.

"As such, if Ampolex (which has a 49 percent stake in the
block) wants to buy Humpuss' stake in the block, the company
should give the money to the government, not to Humpuss," Kuntoro
said.

Kuntoro, however, did not reveal the alleged irregular clauses
in Humpuss' contract.

According to data from Pertamina, Humpuss signed a technical
assistance contract (TAC) with Pertamina in 1990 to develop the
state company's 1,670 square kilometers oil and gas block in Cepu
and neighboring areas.

Under the TAC contract, Humpuss, which was to develop areas
already explored by Pertamina, had to give Pertamina 65 percent
of the block's oil output and 70 percent of its gas output.

In comparison, PSC holders, which have to develop unexplored
areas, must give Pertamina 85 percent of their oil output and 70
percent of their gas output. (jsk)