Government refuses to guarantee Unocal?s deep see oil project
Friday, January 24 2003 - 03:23 AM WIB
The refusal was unveiled by Minister of Energy and Mineral Resources Purnomo Yusgiantoro in an interview with Koran Tempo?s reporter on Thursday.
The minister said that the government could not meet the U.S. government-owned Overseas Private Investment Corporation (OPIC) to guarantee the loan for the West Seno project because the funding for the project was in the form of equity financing.
He said that the government had sent a letter to OPIC on its refusal to guarantee the offshore oil project to be developed by Unocal. "The point is that the government will not provide any guarantee to a production sharing contract (PSC) project," he added.
OPIC, which specializes in providing insurance to U.S. companies? overseas investment, has agreed to guarantee about US$350 million of the funding to develop the West Seno project. Of the total funds, about $300 million will be used to finance offshore production and processing facilities, and a 60 kilometer-pipeline which transmits oil and gas to Unocal?s receiving terminal in Santan, East Kalimantan.
The remaining $50 million will be used to finance exploration and production activities at the West Weseno II project.
Pertamina owns 10 percent in the offshore oil field, which is operated by Unocal Makassar Ltd. The project is expected to start production early 2003 with an initial capacity of 60,000 barrels per day.
The Indonesian government was forced to pay compensation about US$260 million to OPIC some years ago due to the delay in the construction of the Dieng Patuha geothermal power plant following the country?s worst ever crisis in 1997. This bad experience should become a good lesson for the government so that the future guarantee scheme would not cause problem again in the state budget. (*)