Pertamina Threatens to Withdraw from Java 1 Power Project

Pertamina has threatened to withdraw its bid for the Java 1 power plant after Perusahaan Listrik Negara (PLN) amended the terms and conditions of the tender.

Chair of Pertamina’s Consortium for the Java 1 Project, Ginanjar, explained that at the opening of the tender in May 2015, PLN required all bidders to have their own gas supply for the plant. The availability of gas is an important component to ensure the viability of the project. (Read: PLN Submits Revised Business Plan on Deadline Date)

To comply with the requirement, Pertamina sought a reliable partner to supply gas. In April, Total Gas & Power joined the consortium. Total was considered capable of strengthening and arranging gas supply. Previously, Pertamina has also partnered with Marubeni.

However, in May this year or two months prior to the announcement of the winning bidder, PLN changed the terms of the condition of the tender. According to Ginanjar, PLN created a new rule that required the winning bidder to use gas from the Tangguh Field in Bintuni Bay, Papua, to fuel the power plant.

"It doesn’t really matter, but to ensure fairness, they should have changed (the rules) earlier, not with just two months to go,” he said to reporters in Jakarta, Friday (20/5).

Pertamina feels that all of its efforts were in vain due to these changes, especially as it had already shelled out US$ 1.5 million on the project, claimed Ginanjar.

Also, if the company had known from the start that would be sourced from Tangguh, Pertamina would not have needed to partner with Total. It could have just partnered with a low-cost, quality construction company like Samsung. (Read: PLN Insists to Wait for Audit Results Amid Power Crisis in Nias)

However, there will be consequences for Pertamina if it withdraws from the project due to its position as consortium leader. As a rule, PLN does not allow a consortium to change its leader. If it is changed, the consortium will be dissolved. This would mean that Total and Marubeni could not continue their participation in the tender process. "We feel sorry for Marubeni and Total, if they still want to continue," said Ginanjar.

With a capacity of 2x800 MW, the Java 1 Project is the largest gas-fired power plant in the 35 GW power project. The plant requires a huge 250 million standard cubic feet (mmfcfd) of gas per day for its operations. This will enable the project to meet the requirement that gas-fired power plants produce 20 percent of the power for the 35 GW megaproject.

(Read: Sudirman: President to Evaluate PLN’s Management due to Delayed Power Projects)

The winning bidder of this project will be granted a 25-year concession years before the power plant is handed over to the state, which in this instance is PLN.

In addition to the Pertamina-led consortium, eight other consortia are bidding for the Java 1 Project tender. The eight are a consortium of EDF, Barito and China Datang; a consortium of China Ocean, Shanghai Electric, and Toba Bara, a consortium of Adaro and Sembcorp; a consortium of Sino Steel, Beijing, and Air Indo; a consortium of Mitsubishi, PJB, and Rukun; a consortium of Medco Energi, Mitsui, and Medco Power; a consortium GCL, Bukaka, and SEL; and a consortium of YTL, Bumi, and Pertiwi.