Total case will spook investors: IPA

Total case will spook investors: IPA

Fabiola Desy Unidjaja, The Jakarta Post/Jakarta

While the legal battle involving Total E&P Indonesie -- a local
affiliate of French oil giant Total SA -- and its contractors is
only in its early stages, it is already sending a bad signal
about Indonesia's investment climate.

President of the Indonesian Petroleum Association (IPA) Chris
B. Newton said the bankruptcy case against Total was not helping
the investment climate at all, and feared it would scare away
badly-needed foreign investment.

"This is not helping with the overall investment climate.
Total is a large company and I am sure they have their reasons
(on the case)," Newton told The Jakarta Post on Friday.

IPA groups together oil and gas contractors and service firms
in Indonesia.

On Jan. 14, PT Istana Karang Laut and PT Sanggar Kaltim Jaya
filed a bankruptcy petition in the Jakarta Commercial Court
against Total, accusing the company of breaching a contract over
a project in the Tunu field in East Kalimantan, by failing to pay
US$7.2 million in claims.

A contract was signed in 2001 between Total and contractor
Sanggar Kaltim, but Sanggar later subcontracted the work to
Istana Karang. The block's Tunu and Peciko fields supply PT Badak
NGL, one of the world's biggest LNG plants.

The contractors argued that Total was $7.2 million short in
fulfilling the contract. Total is denying the claim, saying there
is no substantial evidence of such debt and insisting that they
have fulfilled all of their obligations to the contractors.

Newton added that investors would get confused over the fact
that in Indonesia a company as large and financially-sound as
Total could be declared "bankrupt" over relatively small amounts
of funds.

Total SA is currently the world's second largest liquefied
natural gas (LNG) producer.

"The law on bankruptcy is an issue, because it can actually
declare a multi-billion dollar company bankrupt over a very small
amount of money," Newton, who is also a top executive at Santos,
remarked.

Oil and gas analyst Kurtubi also acknowledged the magnitude of
the case, and the impact it could have on the industry as a
whole. He therefore urged that the court be prudent in deciding
the case, and that the country should not be prejudiced from the
ongoing trial process.

"Should the court grant the (bankruptcy) petition, it should
be made in such a way that it will not burden the country. It is
up to the court but they have to keep in mind that this case
concerns the state," he told the Post.

However, the contractors' lawyer O.C. Kaligis argued that the
case should not be seen as a threat to foreign investors as all
companies operating in Indonesia must abide by the law.

"This is a simple case, they owe some money that they have to
pay. It is impossible for Total to stay here for so many years
without benefiting from their projects," Kaligis said.