Korea's Hyundai Oilbank and Japan's Cosmo Oil in Joint Venture to Build $600 Million Benzene, Toluene and Xylene Plant in South Korea

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Researched by Industrial Info Resources (Sugar Land, Texas)--South Korea's smallest oil refining company, Hyundai Oilbank Company Limited (Seoul), and Japan's fourth-largest refining company, Cosmo Oil Company Limited (TYO:5007), (Tokyo) have announced an equal partnership joint venture to develop a benzene, toluene and xylene (BTX) plant in South Korea.

Cosmo will invest $600 million in the plant, while Hyundai Oilbank will contribute land and related production facilities for the proposed complex. Each company will hold a 50% share in the joint venture company, which remains unnamed. The joint venture was brought about by the common connection that both companies have with the International Petroleum Investment Company of Abu Dhabi (IPIC) (Abu Dhabi, United Arab Emirates): IPIC holds a 70% interest in Hyundai Oilbank and is also a major Cosmo shareholder.

Under the terms of the partnership, which follow on from a memorandum of understanding signed between the two companies in June, the joint venture will acquire an existing 380,000-ton- per-year paraxylene plant from Hyundai Oilbank, located at Hyundai Oilbank's Daesan refinery complex. This plant comprises a 55,000-barrel-per-day (BBL/d) naphtha splitter, a 24,000- BBL/d naphtha desulfurization unit, and a 21,500-BBL/d catalytic reforming unit.

While operating the plant, the joint venture will also commence the construction of a new BTX plant at the same location, using mixed xylene as feedstock, with a production capacity of 800,000 tons per year and an expected completion date of 2013.

The mixed xylene feedstock for the new plant will be supplied partly from a new 300,000-ton-per-year mixed xylene distillation unit that will be constructed at Cosmo's Yokkaichi refinery, with a scheduled completion date of November 2011. The remaining feedstock for the plant will come from Cosmo's existing 300,000-ton-per-year mixed-xylene production facility.

The previous slump in South Korean exports appeared to have eased with an improved performance in the third quarter of this year. The country has Asia's fourth-largest economy and reported an overall growth of 2.9% in the third quarter of the year, compared with the previous quarter. Petrochemicals performed well overall, with aromatics such as benzene, toluene, paraxylene and mixed xylene recording a strong export growth in the quarter.

However, if a proposed trade deal between Taiwan and China goes ahead as expected next year, South Korea may face tougher competition in the near future. Taiwan is one of Korea's competitors in the petrochemical sector, and the proposed trade agreement will see China allowing low or non-tariff imports of petrochemicals from Taiwan, while South Korean products will retain an average tariff of 6.17%. Japan and Korea account for about 32% of the petrochemicals imported into China.

In a recent news concerning Hyundai Oilbank, Korea Western Power Limited (KWP) (Seoul), a subsidiary of Korea Electric Power Corporation (NYSE:KEP) (Seoul), has purchased 100,000 tons of high-sulfur fuel oil for December from Hyundai Oilbank and the Singapore branch of Hanwha Corporation (SEO:000880) (Hanwha) (Seoul).

KWP often buys oil parcels at irregular intervals, depending on local power demand and alternate fuel prices. The oil was purchased on a cost and freight basis, and the price ranged between $490 and $500 per ton. Delivery will be made to the KWP Pyong Tak power plant in three separate cargoes, with 30,000 tons scheduled for December 2-6; 35,000 tons for December 10-15; and the remaining 35,000 tons scheduled for delivery December 24-29.

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