South Korea might lose investments worth 10 trillion won ($8.1 billion) for its industrial complex project, as major refiners are struggling to find a middle ground over land prices before even beginning the project.

South Chungcheong Province currently plans to transform 2.91 million square meters of land in Daesan industrial complex No. 2 and surrounding areas in the city of Seosan into an advanced chemical industrial plant. The project is expected to bring investments worth 10 trillion won according to the Ministry of Trade, Industry and Energy.

For the project to proceed, three firms -- S-Oil, Hanwha Total and Lotte Chemical -- have to work out deals to readjust their territories. Currently, Hanwha Total’s land is surrounded by that of S-Oil. This means that Hanwha cannot connect its existing facilities to its land to further expand. Lotte Chemical’s facilities also share borders with S-Oil’s land.

According to the original plan, S-Oil is to sell land and move to the other side of the complex, allowing each of the other firms to readjust the borders and expand freely.

S-Oil, meanwhile, asked for more than 1.7 million won per 3.3 square meters of a 1.14 million-square-meter plot it owns in Daesan industrial complex No. 2, according to the provincial government on Tuesday. The suggested price exceeds the bidding price of around 1.5 million won of refiners Lotte Chemical and Hanwha Total. Both firms rejected the offer.

“S-Oil is unlikely to make further investments as it already said in February that it would invest 7 trillion (won) for its project in Ulsan by 2024. Also, low demand for petrochemical products amidst the COVID-19 outbreak is giving S-Oil another justification for not making the investment,” a South Chungcheong provincial government official said.

S-Oil, for its part, said it remains committed to the talks.

“We are negotiating with the government and adjacent petrochemical firms over the land selloff in order to facilitate a smooth integrated development by those with actual demand,” an S-Oil official said in response.

“Hanwha Total and Lotte Chemical are trying to buy S-Oil’s land to expand existing facilities. In contrast, S-Oil’s facilities are concentrated in Ulsan, so it has to start from scratch in the complex. S-Oil is just driving up the price to exit the project,” a Hanwha Total official said.

A Lotte Chemical official said, “The deadline is set for April 30, but Lotte Chemical plans to negotiate one more time.” 

By Kim Byung-wook (kbw@heraldcorp.com)