Pertamina needs the government?s help to settle dispute with Karaha

The dispute between Pertamina and Karaha Bodas Company could be settled if the Indonesian government is involved in asking the United States government to require the American company to drop its legal suit against the state oil and gas company, Suara Karya reported on Tuesday.

"The Indonesian government can ask Karaha Bodas to drop its demand through a G-to-G approach. This is the only approach that is still possible to drop the case," Ainun Naim, Pertamina?s finance director, said in a hearing with members of the House of Representatives (DPR).

According to him, for the U.S. government, G-to-G approach is not strange thing. If it is needed, the U.S. government could even interfere with the court process both at home and overseas. "If The Indonesian government take the same approach, the result might be better in asking Karaha to drop it demand," he added.

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 resuspend the project.

Not happy with the decision, the developers then sued Pertamina on the behalf of the government through the International Arbitrary Agency, which then issued a ruling in favor of the Karaha Bodas developers. Pertamina were asked to pay a compensation of US$261 million but the state-owned oil and gas company refused to settle the payment.

Karaha Bodas won an approval from the government in 1994 to develop the geothermal power project in Karaha, West Java under a joint operation scheme with Pertamina. At the same year, the American company also won a contract to sell the electricity to be produced from the Karaha project to PLN. (*)