Hyundai Oilbank has partnered with Lotte Chemical to build a petrochemical plant worth 2.7 trillion won (US$2.5 billion).
Hyundai Oilbank announced on May 9 that it has signed a memorandum of agreement (MOA) with Lotte Chemical Corp. to set up a new heavy fuel-based petrochemical complex (HPC) through their existing joint venture, Hyundai Chemical Corp.
Under the agreement, the two companies will make fresh investment in Hyundai Chemical to build a new plant in Daesan, where Hyundai Oilbank’s refining facilities are located. Hyundai Chemical will also inject its own funds into the new project.
Hyundai Chemical is owned 60 percent by Hyundai Oilbank and 40 percent by Lotte Chemical, but the ratio of investment in the new plant will be decided later.
The new petrochemical plant will produce 750,000 tons of polyolefins and 400,000 tons of olefins a year, using heavy fuel oil as a feedstock.
An official from Hyundai Oilbank said, “The HPC is highly cost-effective compared with existing naphtha cracking centers (NCCs), as it uses heavy crude oil fractions, which are scraps of crude oil, as main materials. Yearly profits from the plant will be about 200 billion won (US$185.36 million) larger than those of comparable existing NCCs.”
When the new plant starts commercial operations in late 2021 as scheduled, it is expected to export 3.8 trillion won (US$3.52 billion) worth of petrochemical products a year and chalk up 600 billion won (US$556.07 million) in operating profits.
Hyundai Oilbank Co., the nation’s smallest refiner, has been seeking to expand its non-refining activities to reduce their heavy reliance on their mainstream businesses amid the won’s strength and lower cracking margins.
The company aims to increase the ratio of its non-refining business to operating profit to 40 percent in 2020 from 32 percent in 2016 by expanding its petrochemical businesses.
With the latest joint venture project with Lotte Chemical, Hyundai Oilbank will be able to achieve vertical integration of its oil refining and chemical business, with its products ranging from petroleum products, such as gasoline and diesel, to aromatic products, including benzene, and olefin-based petrochemical products.
As Hyundai Oilbank makes another step into the petrochemical business, competition is forecast to become severe in the domestic petrochemical market.
SK Innovation Co., the largest refiner in Korea, has stepped up its push for the petrochemical business by establishing China-Korea Petrochemical, a joint venture between its affiliate SK Global Chemical Co. and China Petroleum & Chemical Corp. (Sinopec), the largest petrochemical company in China.
S-Oil, the third largest refiner in Korea, will begin commercial operations of a residue upgrading complex (RUC) and an olefin downstream complex (ODC) in the second half of this year. The company invested 5 trillion won (US$4.63 billion) in the new plants.
GS Caltex Corp. has also decided to invest more than 2 trillion won (US$1.85 billion) to establish an olefin production facility on a site near its plant in Yeosu, South Jeolla Province, earlier this year.
An official from the industry said, “Higher volatility in oil prices has forced oil refiners to enter the non-refining business, such as petrochemicals and lube base oil, and this is also true with global oil giants. However, an imbalance in supply and demand can emerge in the future as investment in petrochemical facilities has grown in a short period of time.”
The Original Posted By Jung Min-hee/Business Korea