A'an Suryana, The Jakarta Post, Jakarta

A group of financial institutions signed here on Tuesday an agreement with state oil and gas company Pertamina to provide loans for the company's US$275 million unleaded gasoline projects in Balongan, West Java, and Cilacap, Central Java.

The lenders will provide a $200 million loan, while Pertamina will cover the remaining $75 million. The Balongan and Cilacap refineries are valued at $191 million and $84 million respectively, according to Pertamina.

The loan, which carries an annual interest rate of 275 basis points above the London Interbank Offered Rate during its 3.5- year maturity period, was arranged by Sumitomo Mitsui Financial Group Inc.

The lenders include Japan Bank for International Cooperation, Credit Lyonnais S.A., ING Bank N.V., UFJ Bank and Bank of Tokyo- Mitsubishi.

"The signing of the agreement marks an important step in the development of the unleaded gasoline facilities, which are expected to start operation by 2005," said Pertamina president Baihaki Hakim.

Pertamina has appointed PT Rekayasa Industri and Japan's Toyo Engineering Corp. to modify the Balongan refinery and is in the middle of selecting a contractor for the Cilacap project.

The development of both plants is aimed at supporting the government's Blue Sky program, which is meant to reduce air pollution caused by leaded gasoline.

Pertamina started selling unleaded gasoline in July 2001 in several areas in the country, including Jakarta, Cirebon in West Java, and Bali. But Pertamina either imports the gasoline or produces it here with some imported raw materials.

By developing the two unleaded gasoline plants, Pertamina expects to reduce costs for the supply of such gasoline.

"It is expected that all gasoline in Indonesia will be lead- free by the middle of 2006," Baihaki said.