State oil and gas firm PT Pertamina may take legal action against aromatics company PT Trans-Pacific Petrochemical Indotama (TPPI) over a US$300 million debt stemming from a 2004 product swap agreement, an insider says.
“Pertamina has taken several measures to collect the money, but with no favorable response from TPPI,” a source within Pertamina said last week.
“Pertamina will continue the efforts, but if these remain unsuccessful, the company may file a case with the arbitration court.”
Pertamina spokesman Basuki Trikora Putra confirmed TPPI owed the company some money.
“I don’t recall the figures in detail, but yes, we have problems and we will take all possible measures to settle this,” he said.
However, he refused to comment on the possibility of taking the case to the arbitration court.
TPPI operates an integrated petrochemical refinery in Tanjung Awar-awar, Tuban, East Java.
In 1997, construction of TPPI’s refinery was halted because of the financial crisis. In 2004, Pertamina was asked to provide a guarantee, as TPPI was about to secure financial commitments amounting to $600 million from JBIC and other private Japanese banks to complete the construction of its refinery.
Pertamina’s guarantee was provided through a product swap. Under this mechanism, Pertamina supplies low-sulphur waxy-residue (LSWR) fuel oil to Japan’s Mitsui, without payment.
Mitsui then pays JBIC and other banks for TPPI’s debts. In return, Pertamina gets middle distillate products (MDP), including kerosene, from TPPI’s refinery.
Pertamina also supplies oil condensate to the refinery.
Following the agreement, the shareholder composition in TPPI changed. Pertamina now owns 15 percent of TPPI shares, while PT Tuban Petrochemical Industries has a controlling stake of 59.5 percent. The remaining 25.5 shares are owned by foreign shareholders.
The source said the swap ran smoothly until the third quarter of 2007, when TPPI stopped supplying MDP products to Pertamina.
Tuban Petrochemical president director Amir Sambodo denied this, saying TPPI still supplied the MDP.
“Everything’s fine, the swap is continuing,” he said.
“Please also remember that Pertamina is also a TPPI shareholder.”
