Govt asked to give an exception on Tuban project

State-owned oil and gas company Pertamina?s president director Baihaki Hakim has asked the government to amend the regulation on the restriction imposed on state owned companies to guarantee commercial loans, Koran Tempo reported on Wednesday.

Baihaki said that the revision was needed to enable the company to guarantee the Tuban petrochemical project in East Java which has been delayed for several years due to the lack of financing.

?If not, the Tuban project should be excluded from the requirement to abide by the regulation,? Baihaki said, adding that the regulation, which was issued in 1972 as part of the government?s program to curb foreign borrowings, was no longer relevant to the current situation.

Baihaki said that a consortium of Japanese companies refused to refinance the project because Pertamina as a state owned company could not guarantee commercial loans.

Pertamina was appointed by the government to guarantee the loans of about US$400 million to be provided by the Japanese consortium to refinance the Tuban petrochemical project. As the guarantee, Pertamina has agreed to provide low sulphur wax residue (LSWR) for four years for the project. In return, Pertamina will receive 15 interest in the project.

The project was previously controlled by Tirtamas Group but the business group lost most of its interest in the project following the rescheduling of its massive debts. At present, the Indonesian Bank Restructuring Agency (IBRA) and Pertamina are the majority shareholders of the project which is also partly owned by Siam Cement of Thailand and Nissho Iwai Corp. (*)