South Korea's GS Caltex Completes Construction of Third Heavy-Oil Upgrade Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--Earlier this week, South Korea's second-largest crude oil refiner, GS Caltex Corporation (Seoul, South Korea), announced the completion of the $2.2 billion No. 3 Heavy-Oil Upgrade (HOU) plant, which will convert extra-heavy oil into high-value fuels such as diesel, gasoline and kerosene. GS Caltex is a 50:50 joint venture between GS Holdings Corporation (SEO:078935) (Seoul) and global oil company Chevron Corporation (NYSE:CVX) (San Ramon, California).

Conventionally, heavy-oil processing facilities use the cheap, bunker-C heavy oil or residual fuel oils, but in this plant, GS Caltex intends to use extra-heavy oil with a high-sulfur content that is even cheaper than bunker-C oil. This will be the first time that this range of heavy oil will be used in a South Korean facility. The new HOU will enable the company to convert atmospheric or vacuum residues from its crude and vacuum distillation units to high value-added products. The facility will use a vacuum-residue hydrocracker (VRHC) that will dramatically reduce the concentration of the sulfuration gas and render the facility more environmentally friendly.

Commercial production at the 60,000-barrel-per-day (BBL/d) plant will commence in September this year. With the mechanical aspect of the plant completed, the VRHC will now undergo a three-month testing period before commercial operations begin. The highly sophisticated new facility is slated to earn the company an additional $60 million per year.

The 21-month construction began in October 2008, and with its completion, the company's heavy oil processing or upgrading capacity will increase from the existing 155,000 BBL/d to 215,000 BBL/d. At this rate of processing, the company's upgrading facilities will account for more than 25% of the company's total refining capacity of 840,000 BBL/d.

The $622 million engineering, procurement and construction contract for the HOU was awarded by GS Caltex to engineering company GS Engineering & Construction (SEO:006360) (Seoul) in late October 2008.

GS Caltex has announced plans to invest about $989 million this year to strengthen its core business and explore future-oriented growth businesses. The company's plans include the increase of exports from 57% of its sales last year to 60% this year. GS Caltex has already secured export orders that amount to 80% of last year's exports. All the light-oil products from the new HOU will also be exported.

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