Pertamina protests BoA?s move to freeze its accounts

Bank of America?s recent decision to freeze state owned oil and gas Pertamina?s accounts worth about US$130 million in the bank as required by the International Arbitrary Agency is illegally flaw, Kompas daily reported in its Sunday edition.

Pertamina?s spokesman Ridwan Nyak Baik said in Jakarta over the weekend that Bank of America?s decision to freeze its accounts was legally wrong because the funds were owned by the Indonesian government.

?The funds deposited the bank are proceeds from the sales of crude oil and gas which are owned by the government. The money is therefore owned by the government,? he was quoted as saying. He added that the state owned oil and gas company would soon send its legal consultants to the U.S. to explain the status of the funds.

The International Arbitrary Agency recently ordered the bank to freeze Pertamina?s accounts in Bank of American as part of its plenary decision on the legal suit filed by Karaha Bodas Company LLC (KBC) against Pertamina and state-owned PLN.

KBC sued Pertamina and PLN following the suspension of its geothermal power project in Karaha, West Java.

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 and PLN were sked 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 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.

According to Ridwan, the government has issued a decree to allow the resumption of the Karaha Bodas power project which has been suspended since late 1997 as part of the government?s retrenchment program to cope with the country?s worst ever financial crisis.

Ridwan said that Pertamina would consider the resumption of the projects after the government issued a decree recently to revoke the earlier decision on the suspension of the project.

The minister?s decree No. 216K/31/Mem/2002 on the resumption of the geothermal power project was issued on March 22 after being approved by President Megawati Sukarnoputri. (*)