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Court orders PGN to pay $17m to partners
The International Court of Arbitration (ICC) in Singapore has ordered Indonesia’s state gas distributor PT Perusahaan Gas Negara (PGN) to pay US$17
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he International Court of Arbitration (ICC) in Singapore has ordered Indonesia’s state gas distributor PT Perusahaan Gas Negara (PGN) to pay US$17.29 million to its partner companies following a fee dispute in a gas pipeline construction project.
The ICC ruled in favor of a group of contractors comprising PT Citra Panji Manunggal, PT Remaja Bangun Kencana Kontraktor and PT Winatek Widita, saying that PGN had paid them $17.29 million short of what it was supposed to, according to a statement filed at the Jakarta Stock Exchange.
The court also ordered PGN to cover the arbitration costs estimated at $215,000 and the contractors’ expenditure on their legal service fees which are estimated to have cost them a total of $428,009.
The contractors group, called “the CRW Joint Operation”, worked on PGN’s $486 million project to construct a gas pipeline from Grissik to Pagardewa in South Sumatra, stretching a total of 195 kilometers, with the pipeline having been finished in late 2007. Wahid Sutopo, PGN corporate secretary, said that the state company had made different project fee calculations from the ones calculated by the CRW group.
According to CRW, PGN failed to pay fees based on 13 variation orders on the project.
“We, however, maintain our position that we have properly paid the project fees. Our legal advisers are now studying the ICC’s ruling before we go for further legal efforts against it,” Wahid said in a phone interview on Monday.
He further denied that the judgement ruled by the court and the payments stipulated by it would constitute a big hit on the company.
“Our current liquidity is healthy. As of September, we recorded Rp 13.5 trillion [$1.43 billion] in revenue while our equity stayed at Rp 10 trillion,” Wahid said.
The Grissik-Pagardewa link, currently in operation, is part of PGN’s pipeline network connecting gas fields in Sumatra to consumers on the heavily populated island of Java.
The pipeline, with a capacity of 400 million standard cubic feet per day (MMSCFD), connects the Grissik gas field operated by ConocoPhillips and the Pagardewa field operated by state oil and gas firm PT Pertamina.
Gas from both fields is then piped underwater to reach Cilegon, Banten before being distributed to industrial and household consumers in Greater Jakarta.
The gas from Sumatra was also channeled to power plants in Cilegon, Banten and Bekasi, West Java, Sutopo said.
In total, PGN operates more than 2,100 kilometers of gas pipelines and several distribution outlets with a capacity of 1,005 MMSCFD of gas. It has allocated $250 million for capital expenditure this year to build pipelines in West Java as well as for carryover payments for the South Sumatra-West Java pipeline and associated maintenance work
Following the news, PGN’s shares dropped 3.7 percent to close Monday at Rp 3,950. (bbs)
