Pertamina will retender contracts linked to Soeharto

JAKARTA (JP): Minister of Mines and Energy Kuntoro Mangkusubroto has ordered state oil and gas company Pertamina to retender contracts awarded to former President Soeharto's family and cronies.

Kuntoro said the contracts which would be retendered included those for the procurement of fuel, goods and materials for the company, and the shipment of Pertamina products.

"The bidding process is aimed at weeding out companies which charge Pertamina excessively high costs," Kuntoro said, adding that the bidding would be opened to all interested parties even though the existing contracts have not yet expired.

Companies which currently hold the contracts should cut their prices below the level proposed in the new call for tenders if they wanted to continue their operations, Kuntoro said.

If they refuse to do so the contracts will be transferred to companies which offer more competitive prices, he added.

"The retendering process does not mean that existing contracts have been annulled. Companies which currently work with Pertamina are being offered the chance to continue working with the company, provided they lower their prices," Kuntoro said, reiterating his earlier commitment to honoring all contracts already awarded to private companies.

Kuntoro said Pertamina would retender the US$46 million a year contract to procure catalysts and chemicals for the production of fuel oil in the Balongan refinery in West Java. Bids will be welcomed by the company from next week.

An informed source said the contract was currently held by PT Catalyst Indopratama, a company partly owned by former president Soeharto's son Hutomo Mandala Putra, who is better known as Tommy.

According to the source, the company charges Pertamina $2,500 per ton of catalyst, compared to a price proposal of less than $2,000 per ton submitted by two rival companies during the initial bidding process.

He said Pertamina would also reopen competitive bidding for the import of fuel next month. Fuel imports have for decades been monopolized by PT Permindo, a company controlled by the Bimantara Group led by Soeharto's second son Bambang Trihatmodjo.

Permindo would be allowed to participate in the bidding process if it wanted to attempt to win the contract based on its own merits alone, Kuntoro said.

The import of crude oil, which was for decades monopolized by Perta Oil Marketing Ltd, controlled by Tommy and Soeharto's crony Mohammad "Bob" Hassan, would be taken under the wing of Pertamina's own trading division from next month, Kuntoro added.

Pertamina said earlier that between 120 and 149 companies which do business with the company were owned by Soeharto's family and cronies.

Soeharto's family dominates the shipping of liquefied natural gas (LNG), crude oil and fuel, gas pipeline network development, geothermal power and the development of refineries and many other aspects of the hydrocarbon sector.

Analysts said the companies obtained contracts from Pertamina through special appointment or quasi-tenders. The terms offered by the companies were frequently uncompetitive but the contracts were nevertheless awarded because of their close relations with the former president.

The House of Representatives said last week that they supported Kuntoro's plan to ask the Attorney General's Office and the Development and Finance Comptroller (BPKP) to audit the legal and financial content of the contracts awarded to the companies.

Legislators believe the companies marked up prices for contracts to work with Pertamina as a matter of course.

Kuntoro also noted yesterday that contracts which would be retendered were only those which had been awarded to the companies through a competitive bidding process.

"Contracts which were awarded without any bidding procedure will be annulled," he said. (jsk)