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Petrochemicals

Lotte agrees with Indonesia to resume $3.9 bn petchem project

To build complex to annually produce 1 million tons of ethylene, 520,000 tons of propylene, 250,000 tons of polypropylene from 2025

By Jan 07, 2022 (Gmt+09:00)

Lotte Chemical and Indonesia’s government ink an MOU on the .9 billion petrochemical project in an online signing ceremony (Courtesy of Lotte Chemical)
Lotte Chemical and Indonesia’s government ink an MOU on the $3.9 billion petrochemical project in an online signing ceremony (Courtesy of Lotte Chemical)

South Korea’s Lotte Group agreed with the Indonesian government to resume a $3.9 billion petrochemical project in the Southeast Asian country, paving way for realizing the group’s plan to expand the business in the region set up more than a decade ago.

Lotte Chemical Corp., the group’s petrochemical unit, on Jan. 7 inked a memorandum of understanding (MOU) with Indonesia’s Ministry of Investment on the project to build a petrochemical complex in Banten, the westernmost province of the island of Java.

Lotte Chemical said it also signed engineering, procurement and construction (EPC) contracts with Lotte Engineering & Construction and Hyundai Engineering Co.

The project of Lotte Chemical’s largest-ever overseas investment is to build a petrochemical complex that can produce 1 million tons of ethylene, 520,000 tons of propylene and 250,000 tons of polypropylene a year. Lotte Chemical will work for the project, dubbed as Lotte Chemical Indonesia New Ethylene (LINE), with Lotte Chemical Titan, its subsidiary in Southeast Asia.

Lotte Chemical expected the LINE project to generate annual sales of $2.1 billion once it starts commercial operations in 2025.

Indonesia’s government pledged to provide incentives including lower tariffs on raw materials and tax benefits for facilities and equipment to build the complex.

TAKES MORE THAN A DECADE TO RESUME

The project had been delayed for more than 10 years.

In 2011, Lotte Group Chairman Shin Dong-bin vowed a 5 trillion won ($4.2 billion) in a petrochemical complex to former Indonesia’s former President Susilo Bambang Yudhoyono.

The group had planned to 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 breakout of the COVID-19 also ruined the project plan.

But Lotte Chemical and Indonesia recently agreed not to delay the construction further.

Lotte Chemical was also known to secure enough funds for the project since it was estimated to log a record operating profit of 2 trillion won, industry sources said.

“The LINE project is an important business to improve Lotte Chemical’s global business competitiveness and contribute to Indonesia’s economic growth,” said Lotte Chemical Vice Chairman and CEO Kim Gyo-hyun.

Write to Kyung-Min Kang at kkm1026@hankyung.com

Jongwoo Cheon edited this article.
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