China eyeing 51 percent stake in Tuban refinery

Chinese state oil companies want to own majority shares in Tuban oil refinery, which is a multinational project involving Indonesia, Iran and China, Bisnis Indonesia newspaper reported in its Friday edition.

PT Elnusa president director Rudy Radjab said Thursday China National Petrochemical Corporation (Sinopec) and China National Offshore Oil Corporation (CNOOC) were considering to take 51 percent stake in the refinery project.

Indonesia and Iran through companies Elnusa and National Iranian Oil Refining and Distribution Company (NIORDC) respectively have signed an agreement during the D-8 Summit in Bali recently. Based on the agreement, Elnusa will have 20 percent and NIORDC 30 percent stakes and the remaining 50 percent will be offered to investors including the Chinese firms as potential investors.

Rudy said his company is negotiating with Sinopec and CNOOC regarding their stake in the project. He said that the Chinese side wants to take majority stake to secure part of the output for them.

?We are expecting that by July there will be an expression of interest (from the Chinese side). Then, we can clinch a deal in August in order to begin the project,? Rudy said.

Elsewhere, Rudi said the Chinese firms had questioned the project costs based on the initial study. That?s why, there will be a strict method in calculating the project costs. There will be some come cost reductions at certain sections and this may bring down the total cost to between US$3 billion to $4 billion.

The refinery, which will have a capacity of 300,000 barrels of heaviest crude per day, will be built, according to the initial study, at a cost of $5 billion. Iran will supply the crude.

As per the initial scheme, the funding for the refinery will be 30 percent from the equities and 70 percent from borrowing from the foreign banks consortium. The construction work will begin in 2007 and the production in 2010. (*)