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)