Shaw Group Heads Consortium to Provide FEED, Equipment and Services for Hyundai Oilbank's Refinery Expansion

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Hyundai Oilbank Company Limited (HOCL) (Seoul, South Korea) has selected the Energy and Chemicals Group of Shaw Group Incorporated (NYSE: SGR) (Baton Rouge, Louisiana) to head a consortium that will provide front-end engineering design (FEED), project management services and supply of equipment for a major expansion of HOCL's refinery complex at Daesan, South Korea. Shaw will partner with Hyundai Engineering Company Limited, also a part of the consortium, to undertake FEED for the integration of 15 processing units. These include a $2.66 billion atmospheric residue desulfurization plant with a capacity of 66,000 barrels per day (BBL/d) and a 52,000-BBL/d residue fluid catalytic cracking unit (FCCU). The consortium will also be responsible for providing FEED services for utilities and infrastructure. The value of the contract remains undisclosed.

Shaw's deal comes close on the heels of the completion of a similar expansion project for SK Energy Company Limited (SEO:096770) (Seoul), for which it integrated 14 processing units and provided allied services to enable the addition of a 60,000-BBL/d FCCU at the company's refinery in Ulsan, South Korea. HOCL's expansion project is being triggered by the need to upgrade the refinery to adhere to the future fuel specifications in the country. The expansion will also enable conversion of high-sulfur fuel oil to more valuable refined products.

The South Korean economy is largely dominated by the automobile, electronics, petrochemicals and other manufacturing industries that make it energy-intensive. It has joined hands with China and Japan in an intense worldwide hunt for oil. In April this year, HOCL and Cosmo Oil Company (TYO: 5007) (Tokyo, Japan) entered into a strategic alliance to jointly explore the global oil market. The two companies will cooperate in various business initiatives in the United States and China and are expected to set up at least three joint committees to take the alliance forward. Cosmo will also transfer its expertise in heavy-oil refining technology to HOCL.

At the beginning of the year, the Energy Ministry of South Korea had decided to increase crude oil imports by 2.7% this year to 909 million barrels, despite having registered a 0.3% decrease in imports last year when the country imported 885.4 million barrels. This decision was triggered by the plunging levels of crude oil inventory, which hit a low of 69.55 million barrels in November 2007, the lowest since April last year. Crude oil imports account for more than 60% of South Korea's aggregate energy imports by value. The cost of crude oil imports was expected to grow by 7.8% during 2008 due to rising costs. However, the country, which is the world's fifth-largest buyer of crude oil, has so far registered a staggering 60% increase in the cost of oil imports this year. This has driven the country's current account into deficit for the first time since the Asian financial crisis of 1997.

In a bid to stimulate the domestic oil industry, the South Korean government currently offers credits to local companies to undertake the development of natural resources overseas. It recently allotted $400 million in structured financing to Samsung Heavy Industries (SEO:010140) (Seoul) for the construction of two deep-water drilling ships. The government aims to increase the share of domestic producers in the nation's aggregate oil consumption to 28% by 2016 and to 40% by 2030.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.