The Export-Import Bank of Korea (Eximbank) announced on Friday that it has signed a $1.2 billion project financing agreement with the Indonesian state-run Petrochemical Company Pertamina to help it expand a refinery.
The signing ceremony was held at the Indonesian Embassy in Seoul, South Korea.
The project calls for an expansion and renovation of Pertamina's oil refinery facilities operating in Balikpapan, the southeast of Kalimantan Island, by 2025.
Korean builder Hyundai Engineering Co. and others have won the project order at $4.4 billion.
Eximbank has assisted Hyundai from the beginning of the project, issuing a letter of intent for financial support from the EPC bidding stage in September 2018.
It signed a basic loan agreement with Pertamina in July 2019 to settle construction costs smoothly and extended a $100 million bridge loan.
The project organizer, KPB, Pertamina's sub-subsidary, will receive PF financing from Exim and use it to pay to Hyundai for the construction.
Eximbank expects the project will generate large foreign currency returns for Korean companies including many small businesses as they are forecast to supply about $1 billion worth of domestic products and services for the project.
Upon the completion of the project, the Balikpapan refinery will have a daily production capacity of 360,000 barrels, up about 40 percent from the current 260,000 barrels.
"While proving vast opportunities for Korean companies hoping to enter the Indonesiatn market, It will also contribute to Indonesia's policy goals to reduce the country's dependence on imported oil and petrochemical products in response to soaring demand and slash pollutant emissions from the production of oil products based on Euro 5," an Eximbank official said.
Write to Bo-Hyung Kim at
kph21c@hankyung.com
