Pertamina ready to reimburse only $7 million for BP's pipeline repair work

State oil and gas firm Pertamina has decided to pay only US$7 million of the $15 million demanded by its contractor BP Indonesia which claims to have spent that amount for repairing the Kangean-Gresik pipeline in East Java, Suara Pembaruan reported on Wednesday.

The US$7 million was actually enough for the pipeline repair project, the newspaper quoted as saying Pertamina?s production sharing management director Effendi Situmorang.

? We had assigned an independent team to examine the claim, and it concluded that we had to pay only US$7 million for the pipeline repair work,? Effendi said.

Effendi complained BP had adopted too high standards to repair the Kangean-Gresik pipeline, thus causing the amounts required reach $15 million.

Pertamina has asked the government not to renew the contract given to BP to operate and manage the Pagerungan field, part of the Kangean gas block, in East Java.

Gas from the Pagerungan field has continued declining causing serious gas shortage in East Java over the past months.

BP had been given the exclusive rights to produce and distribute in East Java its gas from Pagerungan.

Its preferential rights to supply gas to East Java will expire in 2010. (*)