Japan's Cosmo Oil and Korea's Hyundai Oilbank in Joint Venture to Build World's Largest Paraxylene Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--Japanese oil company Cosmo Oil Company Limited (TYO:5007) (Tokyo) has formed a 50:50 joint venture with South Korean oil refining company Hyundai Oilbank Company Limited (Seoul) to build what will be the world's largest paraxylene production facility at Hyundai's Daesan refinery.

Both Cosmo and Hyundai Oilbank are partially owned by International Petroleum Investment Council (IPIC) (Abu Dhabi, United Arab Emirates). IPIC is a major shareholder and strategic partner of Cosmo, with a stake of 20.85%. The company holds a stake of 20% in Hyundai Oilbank.

In April, Cosmo and Hyundai Oilbank signed a broad agreement for business cooperation in areas such as oil and petrochemical trading and refining over the next two years. Since then, the two firms have been examining various possibilities connected with the paraxylene business. Cosmo currently operates four refineries across Japan with a total capacity of 635,000 barrels per day (BBL/d).

The combined investment in the proposed paraxylene plant will exceed $1.02 billion. Construction is expected to be complete by 2013. When fully operational, the plant will produce 800,000 tons per year of paraxylene, which will be supplied to the growing petrochemical markets in China and other Asian countries. In addition to production facilities, the complex will also include storage facilities for paraxylene.

Paraxylene is an aromatic hydrocarbon, derived from mixed xylene, which in turn is manufactured from crude oil. Paraxylene is used in the production of polyesters in the form of fibers, films and resins, and can also be used in liquid form as a solvent and lubricant.

Cosmo also announced plans to construct a mixed xylene distillation plant at its refinery in Yokkaichi, Japan. The unit will produce 300,000 tons per year of xylene from a feedstock of 1 million barrels per year of gasoline. Completion of this plant is scheduled for 2011 with the output destined for use at the new paraxylene plant. At a time when domestic demand for oil in Japan has declined considerably, Cosmo will take advantage of the surplus gasoline distillates to boost production of mixed xylene

The joint venture company formed by Cosmo and Hyundai Oilbank will be established in September this year and will take over the operations of Hyundai Oilbank's existing refinery complex in Daesan. The complex currently produces 380,000 tons per year of paraxylene from a naphtha base. The facility is equipped with a naphtha splitter with a capacity of 55,000 BBL/d, a naphtha desulfurization unit with a capacity of 24,000 BBL/d, a catalytic reforming unit with a capacity of 21,500 BBL/d and a benzene-toluene-xylene plant.

Cosmo expects that profits from paraxylene will improve during the next four years despite the global downturn, which has forced many global energy firms to cancel projects and several Japanese firms to shut down their paraxylene production facilities. The new plants are aimed at stabilizing and increasing profitability by ensuring a consistent production line from the initial crude-oil feedstock through to the finished product. When completed, the new paraxylene plant is expected to earn annual revenues to the tune of $2.04 billion-$3.06 billion.

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