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.