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tate oil and gas company Pertamina has won an arbitration case against local petrochemical company PT Trans Pacific Petrochemical Indotama (TPPI).

Pertamina said on Monday that the Indonesian National Arbitration Agency (BANI) ruled in its favor, determining that TPPI, which operates a refinery in Tuban, East Java, had to pay a US$114 million debt to Pertamina by Sept. 1 at the latest.

The BANI also decided that the administrative costs for the arbitration should be borne equally by TPPI and Pertamina, according to a press release issued by the state oil and gas company.

“TPPI is obliged to pay Delayed Payment Notes [DPN] and interest amounting $114 million to Pertamina,” the release said.

Amir Sambodo, president director of PT Tuban Petrochemical Industries, the parent company of TPPI, said that the arbitration agency’s ruling was in line with TPPI’s plan to pay its entire debt to Pertamina, which was comprised of product delivery notes (PDI) and DPN with a total payment of $375 million.

“The decision is in line with our plan to restructure our debts to Pertamina,” he said as quoted by Antara news agency.

He said that TPPI would begin to make payments in July, two months earlier than stipulated by the agency’s ruling.

The company was waiting for the signing of a debt restructuring agreement with Pertamina, which was actually scheduled for last week, Amir reported. The signing was delayed because Pertamina’s board of commissioners had not given its approval, he added.

On the board’s approval, Pertamina spokesperson Mochamad Harun said that a decision would come soon.

“We hope that in a day or two there will be a decision on that matter,” he said as quoted by detikFinance news portal.

TPPI would pay the debts with a loan of $1 billion from Deutsche Bank, he said.

As of Dec. 31, 2010, TPPI’s debts to Pertamina in terms of DPN reached $269 million.

The debts were the compensation for TPPI’s failure to deliver a fuel product called middle distillate product (MDP) to the company.

According to the agreement between the two companies, the amount of debt will increase by $50 million every six months if TPPI fails to fulfill its obligations.

In March 2010, Pertamina filed a lawsuit against TPPI through the arbitration agency because TPPI did not have “good faith” to pay its debts.

Pertamina sent at least five notices of actionable default (NoAD) to TPPI in the hopes that the company would pay its debts.

However, TPPI rejected Pertamina’s requests by issuing notices of disputes (NoD) against the state firm.

—JP/Rangga D. Fadillah