Tangguh consortium asks for regental level guarantees

Tangguh consortium asks for regental level guarantees

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

The BP Plc.-led consortium for the Tangguh liquefied natural gas
(LNG) project has requested the inclusion of regental
administration in the "government act" clause in the contract.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro
said on Monday that the investors were concerned about the
possibility of wider autonomy being given to regents in the
future.

"We have explained to them that governors, ministers and the
president are the superiors of regents. We consider the three
government," he said.

The government act serves as a guarantee for possible
financial loss if the project fails to meet its sales commitment
due to a policy change by the government.

Purnomo said the government act used to be included in
contracts made by state oil company Pertamina. However, the
government was unprepared for the request, he said.

A consortium of Kellog Brown & Root, JGC Corporation and PT
Pertafenikki Engineering, led by BP (not Halliburton Co.'s Kellog
Brown & Root unit as reported on Monday) was named the contractor
to build Tangguh.

Various controversial bylaws and powerful local
administrations since the implementation of regional autonomy in
January 2001 have become the main hurdles hampering foreign
investment.

Newly revised Law No. 32/2004 on regional autonomy gives wider
authority to governors to coordinate and oversee decisions made
at the regental level. The revised law limits the power of
regents.

Tangguh, located in Papua, is Indonesia's third LNG plant
after Arun in Aceh and Bontang in East Kalimantan and is expected
to make up for the country's declining gas projects.

The consortium is to cover some US$2 billion of the total $5
billion estimated cost for the project, while the rest will come
from lenders.

Purnomo said it was unnecessary for the consortium to ask for
such a guarantee.

"We want everything to move as fast as possible, but there are
rules and I do not see the urgency for them to ask for such a
guarantee."

However, he added, his office was studying the proposal to see
if it could be done without breaking any regulations and cause
problems in the future.