Lotte to resume $4.4 bn Indonesia petrochemical project next year

Lotte Group plans to resume a $4.4 billion petrochemical project in Indonesia next year as it aims to expand the business in Southeast Asia where demand is rapidly growing.

Lotte Chemical Corp. will start construction of the petrochemical complex including an ethylene plant with an annual capacity of 1 million tons in Cilegon, Banten, according to the industry sources and foreign media reports on Aug. 2. Lotte Chemical is set to hold a board of directors meeting to confirm the investment soon.

The company aims to start commercial operations of the complex, which is expected to cost 5 trillion won ($4.4 billion), in 2025.

“The final investment may be increased more than an initial plan,” said a Lotte Chemical official.

Lotte Chemical already has an operation in Southeast Asia through Lotte Chemical Titan in Malaysia.

The project, dubbed as Lotte Chemical Indonesia New Ethylene (LINE), has been delayed for more than 10 years.

MEANDERING IN LAST 10 YEARS

In 2011, Lotte Group Chairman Shin Dong-bin vowed a 5 trillion won in a petrochemical complex to former Indonesia’s former President Susilo Bambang Yudhoyono.

The group had planned start building the complex immediately with an aim of commercial production from 2016. But the project was suspended as talks with the government dragged and the group was engulfed by the bitter sibling feud between the chairman and his elder brother Shin Dong-ju. The chairman attempted to resume the project after victory over his brother, but he was arrested in February 2018 for bribing a close friend of former President Park Geun-hye.

Once he was released from jail in October 2018, he joined a groundbreaking ceremony in December of the year for the project that had been slated to begin commercial operations in 2023. After purchasing land, Lotte Engineering & Construction carried out land preparation works. But the COVID-19 in 2019 ruined the project plan.

The group decided to resume the project again to expand petrochemical markets in Southeast Asia sooner, given growing demand there. It also secures enough cash on healthy operating profit of Lotte Chemical and Lotte Chemical Titan.

“We are preparing for the project without any issues,” said the Lotte Chemical official. “Once the construction starts, we will be able to set up the complex as scheduled.”

Lotte Chemical Indonesia, in which Lotte Chemical holds a 49% stake and Lotte Chemical Titan owns 51%, will lead the project.

Write to Kyung-Min Kang at kkm1026@hankyung.com
Jongwoo Cheon edited this article.