Government backs Pertamina in arbitration case

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that the government fully supported state owned oil and gas company Pertamina in facing the decision of the international arbitration body to freeze the oil company?s accounts.

According to the minister, Pertamina did not oppose the arbitration decision but the execution of the arbitration body?s decision to fine Pertamina about US$261 million as the compensation payment for the suspension of Karaha Bodas Company?s geothermal power project.

The minister argued that the execution of the arbitration decision should be carried out in Indonesia because the location of the project is in Indonesia.

In line with its decision, the arbitration body has blocked Pertamina?s accounts in Bank of America. Pertamina said that the money kept in its accounts in the American bank is the proceeds raised from the sale of oil which is owned by the government.

Pertamina then contested the arbitration decision in a Jakarta court, which then issued a decision in favor of the state oil and gas company.

Purnomo said that the arbitration body was still studying the decision of the Indonesian court related to the ownership of the funds kept by Pertamina in the American bank. ?We are still waiting for the final decision,? he said.

As earlier reported, KBC filed a legal suit against Pertamina for the suspension if its geothermal power plant in Karaha, West Java. KBC, which jointly developed the project with Pertamina, said that the decision had inflicted massive financial loss to the company.

The project was one of several large projects suspended in early 1998 as part of the government?s retrenchment program to cope with the country?s worst ever financial crisis.

The government said recently that it had issued a decree allowing the resumption of the suspended project. (*)