Supertanker sale illegal, senior official asserts

Supertanker sale illegal, senior official asserts

Fitri Wulandari and Tony Hotland, Jakarta

The sale of two giant tankers owned by state oil and gas firm
PT Pertamina has violated at least one government regulation as
the tankers were sold without a prior asset evaluation process by
key ministries, according to a senior official.

Director General of Financial Institutions Darmin Nasution
said that based on government regulation No. 31/2003 on the
establishment of Pertamina as a limited liability company, the
Ministry of Finance and the Ministry of Energy and Mineral
Resources should jointly determine the value of the tankers prior
to the divestment.

"The tankers can be sold if the value had been determined (by
the two ministries)," he told reporters following a meeting with
lawmakers about the 2005 state budget draft.

He did not provide further details.

Meanwhile, Minister of Finance Boediono refused to comment
when asked about the case. He simply repeated, "I won't comment"
after each question.

The sale of the Pertamina tankers had become controversial not
only because of massive corruption that has been alleged, but
also because of the violation of regulations in the divestment
process.

Reports have suggested that the sale was made without prior
approval of the Minister of Finance. (Pertamina only obtained
the approval of State Minister of State Enterprises Laksamana
Sukardi, who is also the president commissioner of Pertamina).

On Monday, vice president Hamzah Haz stated that the sale of
the vessels must receive approval from the Ministry of Finance.

"The conclusion reached in our meeting was that the decision
to sell the vessels should have rested with the Ministry of
Finance and the State Minister of State Enterprises. But it
should be cleared that it must be approved by the Ministry of
Finance," Hamzah said.

Hamzah urged Pertamina to be transparent and explain to the
public all the details in the controversial transaction.

The Corruption Eradication Commission (KPK) is currently
investigating the case.

Pertamina's tanker scandal centers around the sale of two Very
Large Crude Carriers (VLCC) by Pertamina's current management.
The sale took place just a year after the previous management
team had purchased the vessels, which can transport up to 2
million barrels of crude oil per trip.

Bermuda-based Frontline Ltd. were given the green light to buy
the supertankers after the tender process, despite new evidence
leaked to press that showed that Frontline did not have the best
bid. Indonian Essar Shipping Ltd., which did have the best bid,
according to the document, was not awarded the contract.

Frontline has already put up the downpayment for the vessels.
More payments will be made in July and September when the vessels
are delivered to Pertamina by Hyundai Heavy Industries.

The previous management decided to purchase the tankers in a
bid to save on costs incurred for leasing tankers. But the newly
appointed management team decided to divest the assets to raise
cash to help increase the company's cash position. The House of
Representatives has recommended that Pertamina keep the tankers
as it would be more beneficial for the company.

Meanwhile, Pertamina's Workers Union (SPPSI), which has also
opposes the divestment, plans to meet with President Megawati
Soekarnoputri to report on the issue, according to chairman Otto
Geo Diwara.