Tenders for the 20-year contract to tap a mine in northern Quang Ninh province under the control of state-run Vietnam National Coal Corporation (Vinacoal) closed on February 24.

Around that time Vinacoal, which has said it wanted foreign participation in the potentially-lucrative coal industry, announced a ceiling price of $9.5 per tonne on extraction.

Vinacoal has not finalised bid results, but of the three companies that tendered, only Cao Son Coal Mine, a Vinacoal subsidiary, had its price below the ceiling.

Vietnam has official proven reserves of at least 3.5 billion tonnes and many "billions more tonnes" that have yet to be surveyed, according to Vinacoal.Vinacoal insists it has done nothing wrong in the tender process and said the $17.50 per tonne bid from Jakarta-based PTPetrosea was too expensive. Petrosea is a subsidiary of Australian engineering contractor Clough Ltd.The third bidder was a local military firm.

A senior Vinacoal official expressed displeasure at what he said were complaints from PT Petrosea and "interference" from the Australian embassy in Hanoi over the ceiling price.

But one mining expert in Hanoi questioned how a foreign coal firm could extract at such a low price in Vietnam. The contract envisages tapping around one million tonnes per year.

"No foreign company can compete on these terms. They are wasting the time of a company like Petrosea," said the expert, who had knowledge of the tender.Citing issues of company confidentiality, Australian embassy officials declined to comment.

Tony Speechley, president director of PT Petrosea, said it was normal for a target price to be included in a coal tender, but added he was not sure how Vinacoal reached its ceiling.

Advance knowledge of the ceiling would not have affected Petrosea's bid price, hesaid. "Our bid was competitive if the client had wanted to buy an international standard contract addressing technology, safety, training and environmental issues," Speechley said.

"We would have helped modernise Vietnam's coal industry," he said, adding that Petrosea would still look at potential projects in the communist-ruled country.

There has been little foreign involvement in Vietnam's coal mining sector in recent years, partly because of a difficult regulatory environment, foreign lawyers say.

The Vinacoal official said the firm was only getting around $20 per tonne for its coal exports and therefore Petrosea's bid was not feasible. The industry expert disagreed, saying Vietnam was fetching $25-27 per tonne and above for its better coal.

"The Australian bidder is not right in complaining before the tender result is made public," the Vinacoal official said.Vinacoal had replied to a letter from the Australian embassy over the issue and sent an explanation to the industry ministry, which overseesthe coal sector, the official said.

Vietnam expects to sell a combined 11.2 million tonnes of coal locally and abroad in 1999 and 13 million tonnes in 2000. (Reuters)