Mandiri, KDB to finance lube plant project

Indonesia?s Bank Mandiri and South Korea?s Korea Development Bank will join hands to finance the development of a lube plant project jointly owned state owned oil and gas company PT Pertamina and South Korea?s SK Corporation Ltd, Bisnis Indonesia reported on Thursday.

The two banks will cover $140 million of the total investment of $200 million needed for the development of the lube base oil group III plant, Mandiri?s director Abdul Rahman said.

Abdul said both banks were still discussing their portion of contribution to the syndicated loan but Mandiri was committed to providing a maximum of $90 million for the project.

Pertamina and SK Corporation Ltd are planning to build a joint venture to build the lube plant in Dumai, Riau with SK having a 65 percent stake and Pertamina?s subsidiary Patra Niaga 35 percent, Pertamina?s president Ari H. Soemarno said.

SK?s CEO Jeong Joon Yu said 60 percent of the project?s investment will be financed by financial institutions with the remaining 40 percent from both companies? internal budget.

Ari said the plant was expected to start operation in 2008 with output steadily increasing from 7,250 barrels per day (bdp) in the beginning to 10,000 bpd at peak production.

Ari said the products will be sold on the domestic and export markets, but most of the products will be exported in view that the product is expensive and mostly used for luxury cars. SK will hold the right to sell the product overseas, while Pertamina will have the right to sell it on the domestic market. (*)