PT McDermott denies graft in gas project

JAKARTA (JP): Marine construction company PT McDermott Indonesia denied allegations on Saturday that it won a bid for the construction of a giant gas pipeline project in the South China Sea due to corruption practices.

"The allegation of corruption ... is absolutely false. The contract was won fair and square following a lengthy, open and transparent bid process," company area manager Howard J. Cleave said.

Cleave said the subsidiary of American firm J Ray McDermott SA could cut project costs and offer the lowest bid to win the 560- kilometer underwater pipeline project due to experience it accumulated in 27 years of operation in the country.

McDermott won the project with the lowest bid of US$335 million, followed by Italian firm Saipem ($373 million), French firm ETPM ($383 million) and Japanese company Nippon Steel ($484 million).

"We have more experience in marine petroleum and natural gas construction in Indonesia and the Far East than our competitors.

"Our resources are here, while some of our competitors may have incurred costs of mobilizing their resources from other parts of the world," Cleave said.

McDermott is based on Batam Island, close to the Natuna Islands.

The pipeline will be used to transport natural gas from the gas fields, owned by Pertamina's production sharing contractors grouped in the West Natuna Gas Consortium, to Singapore.

The consortium comprises Premier Oil of Britain, Conoco Inc. of the United States and Gulf Resources of Canada.

Pertamina reached a deal early last year to supply natural gas to Sembawang Gas of Singapore for 22 years starting April 2001.

Cleave made the statement following the House of Representatives decision to recommend the government and state oil and gas company Pertamina cancel the appointment of McDermott for the project.

House Commission V for mines and energy affairs made the recommendation after finding alleged evidence of corrupt practice in the bid process for the project.

The commission said the investigation done by its team found that McDermott benefited from insider information on the project provided by former employees who used to work with Conoco.

The information enabled McDermott to offer lower costs than those offered by competing bidders, the investigation stated.

The commission also claimed to have discovered documents showing that Conoco asked Pertamina to award the project to McDermott without a competitive bid, but it quickly withdrew the request after Soeharto resigned in May last year.

The commission called on Pertamina to transfer the project to McDermott's competitors with first priority given to the company offering the lowest bid.

However, Cleave denied receiving insider information.

"We categorically deny that we had insider information. To the best of our knowledge, all bidders had exactly the same information," Cleave said.

He said all bidders made their respective bid based on the survey data, including the contour of the sea bed and the strength of soil, as provided by the consortium in July last year.

Cleave refused to comment on the House recommendation but he said he welcomed media reports which said that Pertamina was considering an independent audit of the tender for the project to convince the House that the deal was fair.

"McDermott is confident that such an audit will find that everything about the tender for the project was clean, above board and absolutely free of any corruption, collusion and nepotism," he said.

McDermott Indonesia is partly owned by former president Soeharto's golf partner Mohammad "Bob" Hasan. (jsk)