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Petrochemical Companies Accelerate Chemical Business Expansion Based on Non-oil Business
Competitive Measure
Petrochemical Companies Accelerate Chemical Business Expansion Based on Non-oil Business
  • By matthew
  • April 14, 2015, 05:30
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A paraxylene plant in South Korea.
A paraxylene plant in South Korea.


Domestic petrochemical companies, which depend on oil as a traditional energy resource, are expanding their non-oil based chemical businesses. 

Petrochemical companies have built additional non-oil based chemical plants, including natural gas, shale gas, and condensate and liquefied petroleum gas (LPG) from naphtha-based plants, which are high in cost. So the business structure reform of the whole industry is likely to spread. 

According to sources in the industry on April 13, Hyosung is expected to complete the extension of its Yongyeon plant in Ulsan to produce propylene, which was an investment of 280 billion won (US$253.97 million) in 2013, by the third quarter and begin operations. In the process of extending the plant, Hyosung changed its constructor, but it is still highly likely to complete the project within the year. 

The company increased its propylene production capacity from 200,000 tons to 500,000 tons through the extension. In particular, the plant produces propylene through propane dehydrogenation (PDH) using LPG, unlike naphtha-based petrochemical plants generally producing it by decomposing crude oil.

Lotte Chemical is preparing to build natural gas-based chemical plants in Surgil, Uzbekistan. The company invested US$338 million (372.65 billion won) in a US$3.9 billion (4.3 trillion won) chemical complex construction project, in which the Uzbek government also participated. Once the chemical plant is completed in the country by the end of this year, Lotte Chemical will produce 390,000 tons of high-density polyethylene (HDPE) and 80,000 tons of polypropylene (PP) based on locally-produced natural gas. Aiming to start operations next year, the company is also establishing a condensate-based mixed-xylene (MX) plant in Daesan, South Chungcheong Province, in cooperation with Hyundai Oilbank. Also, Lotte Chemical will complete a plant that produces shale gas-derived ethane in the U.S. by 2018.

Last year, Samsung Total and SK Incheon Petrochem constructed and started operating condensate-based paraxylene (PX) plants, which were partially produced from natural gas, in a bid to increase the production volume by 1 million tons and 1.3 million tons, respectively. 

Also, LG Chem is jointly building a natural gas-based petrochemical plant in Kazakhstan with its state-owned Kazakhstan Petrochemical Industries (KPI). The company decided to invest a total of US$4 billion (4.41 trillion won) in the plant in a bid to produce 840,000 tons of ethylene and 800,000 tons of polyethylene (PE) in 2011. However, LG Chem postponed the commercial operation time from the first half of 2017 to 2019, due to the recent drop in oil prices and the increase in business expenses.

Moreover, SK Gas is constructing an LPG-based propylene production plant in Ulsan, aiming to start operation next year. And S-Oil Corp. is planning to complete the Olefin Downstream Complex (ODC) project, which produces propylene using residue, by 2017. 

In this way, domestic petrochemical companies are diversifying raw materials in a bid to overcome competitive disadvantages with oil-producing countries that have cost competitiveness like the Middle East and the U.S. Also, it is a structural change, considering the stabilization of the supply and demand of raw materials and business diversification. 

An official from the Korea Petrochemical Industry Association said, “The fundamental difference in raw material competitive power of the domestic petrochemical industry, which heavily depends on naphtha materials, with North America and the Middle East still remains. In order to not be swayed by temporary fluctuations in oil prices, the raw materials diversification and construction of local plants are inevitable.”