Pertamina eyes 30% stake in Tuban petrochemical plant

Pertamina eyes 30% stake in Tuban petrochemical plant

JAKARTA (JP): State oil and gas company Pertamina revealed on
Tuesday that it planned to buy a 30 percent stake in PT Trans
Pacific Petrochemical Indotama (TPPI), which is developing a
petrochemical center in Tuban, East Java.

Pertamina president Baihaki Hakim said the state oil company
was waiting for the outcome of the Indonesian Bank Restructuring
Agency (IBRA)'s evaluation of TPPI before filing its formal bid.

"If the price is right, then why not," Baihaki told reporters
on the sidelines of a seminar discussing autonomy and the energy
sector.

The US$2.3 billion integrated petrochemical center is expected
to produce olein and aromatics once construction is completed.

TPPI's construction came to an halt at the peak of the
economic crisis in 1998.

The existing shareholders -- Tirtamas Group with 70 percent
ownership, Singapore-based Tuban Petrochemical Pte Ltd with 20
percent, and Japan's Itochu and Nissho Iwai with equal stakes of
5 percent -- had invested a total of $900 million before the
project was suspended.

Tirtamas has reportedly transferred its 70 percent stake to
IBRA after the agency took over Tirtamas' bad debts with several
local banks.

IBRA has since been looking for new investors to resume
construction of TPPI.

"We have been approached to enter (TPPI) with an approximate
30 percent stake," Baihaki said.

According to him, Pertamina as the main supplier of TPPI's oil
and gas resources, is well suited to enter the company.

"We're not just talking, we have the experience," he said.

Baihaki has said earlier that Pertamina was supplying 30
percent of the domestic petrochemical demand, and that expanding
into this industry would be in line with Pertamina's core
business.

"We're eying the petrochemical industry, which we have
previously ignored," Baihaki added.

Before turning to Pertamina, TPPI had sought support from
foreign investors. They, however, had turned down the project
because of security concerns in Indonesia.

Earlier this year, Pertamina's downstream director Ariffi
Nawawi said that investing in the aromatic industry would be
lucrative due to an estimated shortfall in aromatic supplies by
the year 2004.

"We will see the highest (profit) margin for aromatics by the
year 2004, and even after the margin declines, it will remain at
a profitable level," he explained.

He added that Pertamina was only interested in developing
TPPI's plant producing aromatics.

According to Tirtamas chairman, prominent businessman Hashim
Djojohadikusumo, 65 percent of TPPI's aromatic plant is already
completed, requiring a further $475 million to finish
construction.

He estimated that it would take about one and a half years to
realize construction of the plant.

The complex will 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 said that Pertamina would seek loans to finance its
investment in Tuban, which would be repaid with revenue generated
from the project. (bkm)