State auditor reignites 'battle' with Chevron

Alfian , The Jakarta Post , Jakarta | Thu, 09/04/2008 10:19 AM | Headlines

A project run by PT Chevron Pacific Indonesia (CPI) has allegedly cost the state up to US$210 million in losses, the House of Representatives' inquiry committee on oil and gas management heard Wednesday.

"If the project continues, losses to the state could reach up to $1.2 billion," Supreme Audit Agency (BPK) official Udju Djuhaeri told the committee.

Since 2000, the CPI field in Rokan, Riau, has received extra power from a cogeneration (cogen) installation operated by partner company PT Mandau Cipta Tenaga Nusantara (MCTN). The cogen installation is used to convert gas and feedwater into electricity and steam power.

Under the country's cost recovery mechanism, CPI can claim expenses from the government for electricity and steam for the cogen plant.

But the BPK has alleged that irregularities in the project have resulted in state losses in the form of cost recovery payments.

Udju said the figure of $1.2 billion in state losses was based on the project's long-term operations, which will run until CPI completes its contract to operate in Rokan in 2021.

The alleged irregularities, which CPI has denied, centered on a potential conflict of interest. MCTN, which like CPI is controlled by Chevron Corp., was appointed directly rather than through a tender, as required by regulations, the agency claimed.

The BPK added that CPI did not carry out any analysis to support its decision to outsource the cogen operation, even though it had the capability to operate the plant on its own at lower cost.

The BPK documents conclude that Chevron, through CPI and MCTN, was seeking to gain maximum profits by recovering costs for electricity and steam from the government.

Udju said the BPK had reported these findings to the National Police in 2007, but intended to reopen the case as there had been no follow-up.

"The BPK is hoping the House inquiry team will use this as an entry point to summon the parties involved to dig deeper into the case," he said.

Santi Manuhutu, CPI corporate communications manager, denied any wrongdoing, saying the electricity and steam processing fee paid by CPI to MCTN was "reasonable and competitive compared to similar projects in Indonesia and in the ASEAN region".

She denied the project had caused state losses.

"The Cogen Project gives benefits to the government of Indonesia from fuel savings in CPI operations and income tax collected from MCTN," she said.

Santi said the direct appointment of MCTN did not violate any existing regulations, and that it was done because of the urgent need for electric power and steam supply.

During the hearing, BPK also reprimanded other energy giants for irregularities.

The agency said ExxonMobil Oil Indonesia was up to $32.53 million in arrears for tax, dividend and royalty payments. The BPK also found that in 2005 ConocoPhillips double-counted a $1.94 million investment credit that had been counted in the previous year.

State-owned oil and gas company PT Pertamina was not spared, with the agency claiming the company had been paid an excess of more than Rp 7.6 trillion ($822 million) in fuel subsidy payments in 2006 and 2007 because of the calculation method used.

Comments (0) | Post comment

A | A | A |