Megawati supports Pertamina's decision not to pay KBC's claim
Wednesday, September 8 2004 - 03:12 AM WIB
"President Megawati has given her support in our decision not to pay the claim payment to KBC. The government will also provide assistance in coping with the claim payment," Pertamina's president director Widya Purnama said in Jakarta on Tuesday that
According to him, KBC had no rights to settle the case through the international arbitration because based on the contract, any conflicts should be taken to the local courts. More over he said that Pertamina had found indication of corruption practices in the KBC management, which, if proven, could foil the international arbitrary decision.
The police had issued a warrant to arrest at least three people allegedly involved in the corruption. Earlier reports said that the people allegedly involved in the corruption included a former senior executive of Pertamina and former director of KBC.
KBC sued Pertamina on the behalf of the government through the International Arbitrary Agency for the suspension of its geothermal project in Karaha, West Java in 1997. Pertamina were then asked to pay a compensation of US$261 million but the state-owned oil and gas company refused to settle the payment.
KBC's claim to state owned oil and gas company Pertamina sharply increased to US$290 million at the end of 2003 from only about US$262 million due to the accumulation of interest payment.
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. The government, however, revoked the decision in 1998 after protests from developers, Caithness Energy, Florida Power, Japan Tomen Power and their local partner PT Sumarah Daya Sakti. But in early 1998, the government again issued a decree to re-suspend the project. (*)