Negotiations on continuation of Tuban project concludes

The negotiations on the continuation of the Tuban petrochemical project have been finally concluded after state owned oil and gas company Pertamina agreed to provide low sulfur wax residue to BP Trading and ANZ as the guarantee for the loan of about US$400 million to be provided by the two companies to resume the delayed project, Koran Tempo reported on Thursday.

Pertamina?s president director Baihaki Hakim said in Jakarta on Wednesday that Pertamina agreed to supply the two companies for six years and in return Pertamina would receive 15 percent interest in PT Trans-Pacific Petrochemical Indotama, the operator of the chemical project.

Also as part of the deal, Pertamina would receive a supply of the raw material for the production of unleaded gasoline after 10 years of the chemical plant?s commercial production.

The fresh loan would actually amount about US$400 million, but including interest and other costs, the total value of the loan would reach US$600 million. The low sulfur wax residue that must be supplied to BP and ANZ should be also equivalent to the total value of the loan.

"With such a scheme, Pertamina has to supply low sulfur wax residue worth US$100 million a year and the supply will last for six years," Baihaki said.

The cooperation scheme changes the composition of the ownership of Trans-Pacific, with Newco holding 59.5 percent, Tuban Petrochemical Pte Ltd 17 percent, Pertamina 15 percent, Itochu Corporation 4.25 percent and Nissho Iwai Corporation holding another 4.25 percent.

Newco is a new company established by the Indonesian Bank Restructuring Agency (IBRA) and old shareholders of Trans-Pacific. IBRA owns 70 percent of the company, while the other 30 percent are held by old shareholder Honggo Wendratmo of PT Silakencana Tirtalestari. Hashim. S. Djoyohadikusumo of Tirtamas Goup, the former majority shareholder of the chemical project lost his entire share ownership after the restructuring of the project. (*)