China and ROK Companies Invest in Ethylene

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Researched by Industrial Info Resources (Sugar Land, Texas)-- China National Petroleum and Chemical Corporation (NYSE: SNP) (Sinopec, Beijing, China) and ROK's SK Energy signed a framework agreement May 28, 2008, to jointly invest in a petrochemical project in China's Wuhan City. The project will involve construction of an 800,000 ton per year ethylene cracking unit.

According to the agreement, the two companies will sign a formal investment deal this year and have set an estimated running date of the project at 2011. SK is expected to take 35% of the shares in the venture.

Construction of the Wuhan petrochemical project started late last year. Besides the 800,000-ton per year ethylene cracking item, the whole project includes also some other ethylene-related items, including a 300,000-ton per annum high density polyethylene (HDPE) item, a 300,000-ton per annum linear low density polyethylene (LLDPE) item and a 400,000-ton per annum polypropylene item. CNPC estimated that the project would cost around $2 billion ($1=7RMB).

This investment is the largest ever by South Korea, according to China's official Xinhua News Agency. CNPC said if they get official approval, the two sides will set a joint venture to manage the project.

Top SK official took part in the groundbreaking ceremony of construction last year and the company has shown great interest in the project, which is the first large-scale refining and chemical project in central China.

Currently, China has seven sets of large-scale ethylene producing equipment, four of them belong to Sinopec. With more capacity under construction, Sinopec expects expand its annual production to 10 million tons in 2010, while that of China National Petroleum Corporation (CNPC) (Beijing) will reach 5.83 million tons by then.

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