TPPI construction will resume late this year

President of the state-owned oil and gas company Pertamina, Baihaki Hakim, said on Friday that construction of the troubled petrochemical center PT Trans Pacific Petrochemical Indotama (TPPI) is expected to resume at the end of this year, with possible completion to be achieved in the middle of 2003, Jakarta Post reported.

Baihaki confirmed that Pertamina had agreed to participate in the project with a 15 percent stake, and a formal deal was expected to be signed soon.

"As soon as a deal that the bankers require has been signed, the funds (to finance the project) can be disbursed," he told reporters prior to a meeting with the House of Representatives budget committee.

Construction of the East Java aromatics center came to a halt in early 1998 in the wake of the regional economic crisis.

Some US$400 million in cash is needed to resume construction of the remaining 40 percent of the project. Pertamina has agreed to provide its products to help raise the needed cash via a product swap scheme.

TPPI was originally owned by local conglomerate Tirtamas Group, which controlled a 70 percent stake, Thai company Siam Cement's local unit Tuban Petrochemical Pte. Ltd. with 20 percent, and the remaining 10 percent owned equally by Japan's Nisho Iwai and Itochu.

Tirtamas was forced to transfer its stake to the Indonesian Bank Restructuring Agency (IBRA) to help repay its debts to the government.

IBRA, a unit of the finance ministry, has long been trying to resolve the TPPI problem.

Foreign investors, after injecting some $700 million into the project, have been reluctant to resume financing amid the country's economic and social problems.

A government official said previously that Pertamina would be treated as a senior creditor, with the first income received by TPPI going to the energy giant.

Pertamina became involved in the TPPI project upon urging from the government following lobbying by Japanese contractors.(*)