The Indonesian Commission for the Supervision of Business Competition on 5 January 2011 handed down its decision that PT. Pertamina, Medco Energi Internasional Tbk, Medco E&P Tomori Sulawesi and Mitsubishi Corporation violated Articles 22 and 23 of Law No. 5, concerning “The Ban on Monopolistic and Unfair Business Competition”. The violations relate to the proposed Donggi-Senoro LNG Project, in Central Sulawesi, Indonesia.
By way of brief background, LNG International Pty Ltd (LNGI, owned 100% by Liquefied Natural Gas Limited ) signed an agreement with Pertamina and Medco in early 2005 to progress the development of an LNG project in Central Sulawesi, based on gas feedstock from Pertamina and Medco (now referred to as the Donggi-Senoro LNG Project). As required in the agreement, LNGI, and its Indonesian partner, subsequently incorporated an Indonesian foreign investment company, PT. LNG Energi Utama, to own and develop the LNG project. In 2006, Mitsubishi undertook detailed due diligence of PTLNG’s proposed LNG project on the basis of Mitsubishi potentially becoming a partner in, and buyer of LNG from, PTLNG’s LNG project. Such due diligence, under a confidentiality agreement, included access to all technical, financial, modeling, planning and development information.
Despite PTLNG having significantly advanced the project and incurred considerable costs, Pertamina and Medco decided, in late 2006, to seek tenders to develop the Donggi-Senoro LNG Project. Furthermore, despite Mitsubishi’s due diligence of PTLNG, Pertamina and Medco allowed Mitsubishi to submit a tender. Pertamina and Medco subsequently awarded the Donggi-Senoro LNG Project to Mitsubishi and notwithstanding PTLNG’s protestations would not retract this decision. PTLNG protested its concerns to the Government of Indonesia and after a lengthy and comprehensive investigation KPPU has determined that the tender process was in fact unfair and, in such determination, cites PTLNG as an affected party.
The Company is now considering, with its legal counsel in Indonesia, what action PTLNG may take in an endeavour to recoup its costs and damages. At this stage no decision has been reached and the Company’s shareholders should not consider KPPU’s determination as an automatic path to a financial settlement of this matter. The fines levied by KPPU are payable to the Government of Indonesia (not PTLNG) and Pertamina, Medco and Mitsubishi have the right to appeal the decision to the District Court in Indonesia, and KPPU or “Pertamina, Medco and Mitsubishi” then have the right to appeal the District Court’s decision to the Supreme Court of Indonesia.
The Company praises KPPU for its persistence, diligence and competency in examining the case and its final determination. The Company considers the decision as highly positive for investment in Indonesia and demonstrates the Government of Indonesia’s ongoing commitment to ensure ethical and competitive business practices in Indonesia.
[mappress]
Source: Liquefied Natural Gas Limited, January 10, 2010;