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)