Communicator

PRefChem Refinery Complex. Credit: prefchem.com

Malaysia’s Pengerang Refining Company (PRefChem Refining) has resumed operations by mid of May at one of its two residue fluid catalytic cracking (RFCC) units at the Johor complex, following an extended shutdown for repairs since late January. The two RFCC units at PRefChem have a combined processing capacity of 170,000 barrels per day (bpd), making them among the largest of their kind in the region

Operational Challenges and Market Impact

• Both RFCC units had previously encountered operational disruptions in the fourth quarter of last year, further impacting production reliability. The recently restarted RFCC unit, which primarily produces gasoline, is not yet operating at full capacity, according to sources familiar with the matter. The unit had been offline since the last week of January due to technical issues, contributing to a significant reduction in overall refinery throughput.
   
• During the shutdown, crude processing rates at the 300,000-bpd refinery dropped to around 50% on average over the past four months. Since the recent restart, sporadic offers for gasoline cargoes loading in June have appeared in the market, signaling a gradual return to normal operations.
   
• In addition to gasoline, the refinery is expected to load 5–6 cargoes of diesel (each 300,000 barrels) in May, according to trade estimates, rebounding from less than 1 million barrels in April.
   
• On the petrochemical side, PRefChem’s only steam cracker, with an ethylene capacity of 1.2 million metric tons per year, has also been offline for repairs since late January. The cracker is slated for a restart in the second half of June, according to industry sources.

Strategic Context

PRefChem, a 50:50 joint venture between Malaysia’s state oil company Petronas and Saudi Aramco, operates the integrated refinery and petrochemical complex at Pengerang, Johor. The facility is a cornerstone of the Pengerang Integrated Complex (PIC), which is Malaysia’s only fully integrated refinery, steam cracker, and petrochemical site. The complex is designed with multiple train configurations—including the two-train RFCC system using Axens technology (R2R) —to enhance production reliability and flexibility. Despite facing recurring operational disruptions since 2023, the company continues to invest in new technologies and capacity expansions to support long-term growth and regional energy security:

• New Projects: The $5.3 billion Pengerang Energy Complex, securing $3.5 billion in financing in December 2024, will add 2.6 million metric tons/year of aromatics capacity by 2028.
   
• Specialty Chemicals: The recently commissioned isononanol plant (250,000 tons/year) at the Pengerang Petrochemicals Complex achieved on-spec production in 2024, targeting full capacity by 2025.

Market Positioning

PRefChem remains strategically positioned as a major supplier of Euro 5-grade fuels and petrochemical feedstocks in Southeast Asia:

• Euro 5 Fuels: The refinery produces high-specification gasoline and diesel.
   
• Integrated Complex: The site houses 3.4 million tons/year of petrochemical capacity, including propylene and ethylene, though recent spot propylene tenders suggest inventory management amid cracker downtime.

Analysts note that while near-term operational reliability concerns persist, PRefChem's long-term growth pipeline and low-carbon investments position it to capitalize on Southeast Asia's rising petrochemical demand.

#prefchem  #saudiaramco  #petronas  #pengerang  #rfcc  #gasoline  #diesel  #steamcracker  #malaysia 

Cilegon Plant - LOTTE Indonesia New Ethylene (LINE). Credit: PT Lotte Chemical Indonesia

PT Lotte Chemical Indonesia (LCI) is undergoing a transformative phase marked by significant investment, new long-term supply agreements, and persistent industry headwinds. The company’s strategy and recent developments provide insight into both its growth ambitions and the broader challenges facing the Southeast Asian petrochemical sector.

Major Expansion: New Cracker Facility

LCI is set to commence operations at its new mixed-feed cracker in Cilegon, Banten province, Indonesia, in the second half of 2025. This facility, part of a $3.95 billion investment, will have an annual production capacity of 1 million metric tons of ethylene. The new cracker is a central component of the Lotte Chemical Indonesia New Ethylene (LINE) project, which aims to strengthen the company's upstream integration and supply chain resilience.

Strategic 10-Year Ethylene Supply Deal

In May 2025, LCI secured a 10-year ethylene supply contract with PT Asahimas Chemical, an integrated chemical producer in Indonesia. The contract, effective from July 1, 2025, to June 30, 2035, commits LCI to supply approximately 150,000 tonnes of ethylene per year to Asahimas Chemical. The agreement’s value is expected to exceed 10% of Lotte Chemical Titan (the Malaysian-listed parent)'s latest annual consolidated revenue, underlining its financial significance. Pricing for the contract is pegged to prevailing market rates, ensuring flexibility in a volatile market environment. The long-term deal provides both revenue stability for Lotte Chemical and supply security for Asahimas, supporting downstream chemical industries in Indonesia.

Financial and Market Pressures

Despite these strategic moves, Lotte Chemical Titan continues to face financial challenges. The company reported its eighth consecutive quarterly loss in Q1 2025, though losses narrowed year-on-year due to improved product spreads and contributions from its US associate. For Q1 2025, Lotte Chemical Titan posted a net loss of RM125.67 million, compared to RM178.03 million a year earlier, with revenue dropping 22.3% to RM1.49 billion on lower sales volume and prices. The global petrochemical sector is currently experiencing margin compression due to oversupply, particularly from China, which has weighed on profitability and forced companies like Lotte Chemical to operate existing Malaysian crackers at reduced capacity (45%-50% since December 2024).

Ownership Restructuring and Strategic Flexibility

To bolster its financial position, Lotte Chemical reduced its stake in the Indonesian venture from 49% to 24% in early 2025, selling the shares to a consortium of South Korean financial institutions. Lotte Chemical Titan retains a 51% stake in Lotte Chemical Indonesia. The company is also exploring feedstock flexibility for the new cracker, planning to source naphtha from the Middle East and potentially substitute up to 50% of naphtha feedstock with natural gas liquids such as LPG or ethane, depending on market economics.

Sector Outlook and Strategic Positioning

The Southeast Asian petrochemical industry is in a phase of consolidation, with mergers and acquisitions on the rise as companies seek to enhance shareholder value amid challenging conditions. Lotte Chemical’s long-term supply contract and the new Indonesian cracker position it to capitalize on regional  demand growth, even as it navigates short-term market volatility and restructuring pressures. The new supply agreement is not expected to impact the company’s share capital or ownership structure, maintaining stability for investors.

Conclusion

Lotte Chemical Indonesia’s ambitious expansion and strategic supply agreements reflect a commitment to long-term growth and regional market leadership. However, the company continues to navigate a difficult economic landscape characterized by global oversupply, margin pressure, and the need for financial restructuring. The coming years will be pivotal as the new cracker comes online and the company seeks to leverage its strengthened position in Indonesia’s growing chemical sector.

#lotte  #lottechemical  #indonesia  #malaysia  #lci  #lineproject  #cilegon  #asahimas  #agc  #asahiglass  #ethylene  #steamcracker  #ethyleneplant 

Polyolefin plants with technologies and capacities have been added.

#lotte #lottechemical  #malaysia  #unipolpe  #univation  #lyondellbasell  #spheripol 

Polyethylene plants with technologies and capacities have been added.


#lyondellbasell  #spheripol  #mitsui  #mitsuicx  #hdpe  #ldpe  #lottechemical  #malaysia 

Lotte Chemical Titan (LCT) entities and production sites in Malaysia have been created.

LCT (M) Sdn Bhd is 1the manufacturing entity and a 100% subsidiary of LCT Holding Berhad, itself a subsidiary controlled by Lotte Chemical Corporation in Korea. 

LCT (M) Sdn Bhd operates two manufacturing sites in Pasir Gudang and Tanjung Lansat. 


#lottechemical  #lottechemicaltitan  #lct  #malaysia