Pertamina-Chevron may end off-take agreement

Pertamina may soon end its ?off-take? agreement with Chevron of the United States on the production of parazilene and benzene at the state owned oil and gas company?s BTX Plant in Cilacap, Central Jakarta, Bisnis Indonesia reported on Monday.

Pertamina and Chevron have been involved in serious negotiations over the change in the agreement related to the sales of the parazilene and benzene products, which reach between about US$100 million and $200 million a year.

Sources said that the two companies would resume their negotiations this month. But a growing anti-American sentiment in the country could cause a delay in the planned talks. The negotiations started several months ago after the House of Representatives (DPR) asked the state-owned oil and gas company to end the deal, which they said, only benefited the American company.

BTX Plant was built in 1989 with total investment of US$400 million under a non-recourse financing agreement with Chevron. Pertamina, under the deal, only provided raw materials and supporting facilities such as land, while the financing was provided by a consortium of Japanese companies including Mitsui Bank, Fuji Bank, Bank of Tokyo and Bank of Japan. Chevron is responsible for the marketing of the production.

As all the debts for the construction of the plant had been repaid, the House members recently urged Pertamina to end the off-take agreement, a deal which allows Chevron to solely handle the sale of the plant?s production. The deal actually ended in 2001 but it was later extended until 2001.

Many local companies, which imported most of their parazilene and benzene needs, could not buy the products from the company due to the off-take agreement.

BTX plant has the capacity to produce 275,000 tons of parazilene and 125,000 tons of benzene. (**)