Govt supports Pertamina's involvement in TPPI project

The government has given its supports over Pertamina's planned involvement in the restructuring of the stalled petrochemical project in Tuban, East Java, belonging to Trans Pacific Petrochemical Indotama (TPPI), Kompas daily reported on Thursday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that Pertamina's involvement in the project must be based on business-to-business consideration.

Earlier it is reported that Pertamina has likely to participate in the project through the so-called monetizing the Pertamina product offtake and condensate/propylene supply agreement, as proposed by the Indonesian Bank Restructuring Agency that has taken over most of TPPI debt.

With the proposed scheme, Pertamina would supply propylene/condensate as the feedstocks to TPPI for a four-year period worth US$400 million that would be converted into Pertamina's ownership of 10 at TPPI.

Then, Pertamina would get the products from TPPI after paying a 10 percent processing fee. Pertamina would then sell TPPI products, and most of the proceeds from the sale of TPPI products, or $350 million, would be paid out to TPPI's main contractor JGC of Japan, that would then use the fund to continue the construction of the plant that had been completed by 65 percent.

Some sources have criticized the plan. They contended Pertamina could sell the propylene and condensate directly to the market and get $400 million, and then, Pertamina could use the fund to buy out the project, with the help of the banking industry.

They criticized that the deal was part of efforts to protect the ownership of the founding shareholders at TPPI from dilution.

Purnomo said that Pertamina would be involved in the restructuring of the project because the project itself was nearly completed, so it should not be wasted too long. (*)