Govt provides $290 million for Karaha settlement

The government has provided funds worth US$290 million for state owned oil and gas company Pertamina to settle the protracted dispute with American power firm Karaha Bodas Company, Bisnis Indonesia reported on Saturday.

With the action, the governments hopes to be able to reclaim at least 55 percent or about US$357 million of the government?s funds frozen in a number of American banks, the paper said.

?The government has given Pertamina a month to withdraw at least a half of the frozen money,? Pertamina?s president Ariffi Nawawi told the daily on the sideline of the Stakeholders Meeting between President Megawati and oil and gas corporate leaders in Bogor on Friday.

Separately, Pertamina?s finance director Alfred Rohimone said that although the government had agreed to provide the funds, Pertamina would make the payment only after the court issued a legally acceptable decision.

Karaha Bodas Company?s claim to state owned oil and gas company Pertamina has sharply increased to $290 million at the end of 2003 from only about $262 million due to the accumulation of interest payment.

Karaha Bodas filed arbitration proceedings against Pertamina with an International Arbitration Agency for the suspension of its geothermal project in Karaha, West Java in 1997. Pertamina was then asked to pay a compensation of $261 million but it refused to settle the payment

An American court then ordered the blocking of Pertamina?s accounts in a number of American banks, which also included the government?s money worth $650 million.

The Karaha Bodas project is one of dozens of mega projects which were suspended by the government after the financial crisis hit the country in late 1997. (*)