PT McDermott denies graft in gas project

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)