U.S. banks may immobilize $520m in RI government funds
U.S. banks may immobilize $520m in RI government funds
Moch. N. Kurniawan, The Jakarta Post, Jakarta
The government may be unable to get its hands on some US$520
million in revenue from the sale of liquefied natural gas (LNG)
if state-owned oil and gas company Pertamina fails to win a legal
battle against power producer Karaha Bodas Co. in the U.S.
courts, according to a Pertamina official.
Pertamina finance director Ainun Naim said that if Pertamina
lost the case, the U.S. courts would freeze the funds, of which
some $200 million has already been deposited in Bank of America
and the Bank of New York.
"This is a threat to the state budget," he told The Jakarta
Post on Sunday.
Revenue from oil and gas are considered an important source of
financing for the state budget.
Pertamina and Karaha are currently involved in a legal dispute
over a breach of contract.
The dispute began when the government suspended several power
projects in 1998 following the country's economic crisis. One of
the affected projects involved Karaha, which signed a contract in
1994 with Pertamina and state-owned electricity firm PLN to
develop a gas-fired power plant in West Java.
Karaha, which is principally controlled by two U.S. companies,
Florida Power Energy LLC and Caithness Energy LLC, filed a
complaint with a Switzerland-based arbitration panel, which ruled
in its favor in 2000. Pertamina was ordered to pay Karaha some
$261 million in compensation. Karaha claims in invested $100
million in the project before it was suspended.
A U.S. court confirmed the arbitration ruling, and instructed
the Bank of New York and Bank of America to freeze some $200
million in funds believed to belong to Pertamina. But Pertamina
claims the funds belong to the government.
But Pertamina recently won a verdict in another U.S. court
ordering the release of the funds. Karaha has appealed the
ruling.
Ainun said Pertamina could not ask the private oil and gas
firms that produce the LNG, in a revenue split agreement with the
government, to redirect the proceeds from the next sale of the
commodity because that would violate the existing contract.