Tuban project needs government's support

Newly appointed president of state owned oil and gas company Pertamina Arifi Nawawi said on Friday that the Tuban petrochemical project could go ahead as soon as the government issues a guarantee for the financing of the project.

He said that Pertamina was still waiting for a guarantee letter from Coordinating Minister of Economy Dorodjatun Kuntjoro-jakti before signing the loan agreement with creditors.

"The absence of government guarantee has become the core problem of the project. The financing (issue) is, somehow, not so significant," said Ariffi, the chief commissioner of PT Trans Pacific Petrochemical Indonesia (TPPI), the operator of the Tuban project.

According to Arifi, the loan for the project could be signed in November this year if the government could soon issue the guarantee letter.

A consortium of Japanese companies have agreed to give loans of about US$400 million for the project but the creditors demand the government to guarantee them.

The government has, in fact, appointed Pertamina to guarantee the loan by providing low sulphur wax residue (LSWR) for four years for the project. In return, Pertamina will receive 15 percent interest in the project. But creditors consider that Pertamina's guarantee is not enough.

PT Trans Pacific Petrochemical Indonesia (TPPI) was previously controlled by Tirtamas Group but the business group lost most of its shares in the project following the rescheduling of its massive debts. At present the Indonesian Bank Restructuring Agency (IBRA) is majority shareholder of the company which is also partly owned by Siam Cement of Thailand and Nissho Iwai Corp. (*)