Japan offers Pertamina Tuban plant project
Japan offers Pertamina Tuban plant project
JAKARTA (JP): Japanese creditors want state oil and gas
company Pertamina to continue the development of the stalled
US$2.3 billion petrochemical project in Tuban, East Java,
according to a senior executive at Pertamina.
Pertamina's processing director Ariffi Nawawi said that
Japanese creditors, who financed the Tuban petrochemical project,
wanted Pertamina to buy a stake in PT Trans Pacific Petrochemical
Indotama (TPPI), which owns the project, so that the latter gets
fresh funds to continue with the development.
He said the creditors have made their request through TPPI's
Japanese shareholders Nissho Iwai Corp., and Itochu Corp.
"They (Japan) want Pertamina, but it is up to the government
to decide," Ariffi told reporters.
He said that Japanese creditors chose Pertamina because the
company is the country's main producer of oil and gas - the main
raw material for TPPI's integrated olefin and aromatic plants.
Even though Japan has only a minority stake in the Tuban
petrochemical center, the country has been pressuring the
Indonesian government to seek new investors for the project.
"We're interested in the project, providing the government can
meet two conditions," Ariffi said.
He said the government must first clarify the composition of
the project's ownership, and secondly perform due diligence on
its value.
TPPI was 70 percent owned by the Tirtamas Group and 20 percent
by a Singapore unit of Thailand's Siam Cement PCL, Tuban
Petrochemical Pte Ltd. The remaining 10 percent is evenly split
between Itochu and Nissho Iwai.
However, Tirtamas has reportedly lost its stake in Tuban to
the Indonesian Bank Restructuring Agency (IBRA), which took over
controlling interest in Tirtamas, after the group failed to repay
debts to several local banks.
Ariffi said that Pertamina was only interested in continuing
the development of TPPI's aromatic plant.
Construction of the olefin and aromatic integrated project
halted in early 1998, after $900 million had been spent -- about
$200 million from equity and $700 million from contractors'
coffers.
Tirtamas chairman Hashim Djojohadikusumo has said that 65
percent of TPPI's aromatic plant has been completed, and that
another $475 million was required to finalize construction.
Hashim said he hoped for foreign investors to come up with the
shortfall, as the aromatic industry showed good potential.
However, foreign investors turned down the project on security
concerns and political instability in Indonesia.
Yet, according to Ariffi, investing in the aromatic industry
is lucrative because of projected shortfalls in aromatics in
2004.
"We will see the highest (profit) margin for aromatics by the
year 2004; and even after the margin declines, it will stay on a
profitable level," he explained.
TPPI has estimated that it would take about one and a half
years to complete the aromatic complex.
When completed, the facility would have an annual production
capacity of 335,000 tons of reformate, 1.1 million tons of
kerosene, 189,000 tons of diesel fuel, 500,000 tons of
paraxclyene, 100,000 tons of toluene, 120,000 tons of orthoxylene
and about 1 million tons of light naphtha.
Ariffi stressed that if Pertamina were to enter the project,
then it would only be by way of borrowed funds.
"We will not use our money to invest in the project, Pertamina
will not spend a cent for it," he said.
Despite Hashim's difficulties in attracting investors for the
project, Ariffi was confident of finding external financing.
He said that Pertamina would repay the loans by using the
revenue from the project.
Pertamina president Baihaki Hakim confirmed the company's
interest in joining the Tuban petrochemical project because it
was in line with Pertamina's core business.
The state company already supplies 30 percent of demand in the
domestic petrochemical market, according to him.
"It's only natural that we're eying an expansion into the
petrochemical industry," he said.(bkm)