To Diversify Income Source, Achieve Economies of Scale
South Korean oil refining and petrochemical companies such as Hanwha Total and Yeocheon NCC are expanding their naphtha cracking centers (NCCs) for income source diversification and economies of scale, respectively.
Yeocheon NCC recently completed the expansion of its NCC and butadiene production facilities by investing 740 billion won for about two years. The trial operations will end this week and commercial operations will be initiated immediately. Then, the company’s annual ethylene and butadiene production volumes will increase from 1.95 million tons to 2.3 million tons and from 240,000 tons to 370,000 tons, respectively.
Hanwha Total’s NCC expansion is scheduled to be completed in the first half. The company has invested 147 billion won since 2018 to that end. Once the commercial operation begins, its annual ethylene production volume will increase from 1.4 million tons to 1.55 million tons.
LG Chem is planning to resume the operation of its NCC in Yeosu this month after the shutdown caused by a fire last year. It is going to expand the center to 800,000 tons by the end of this year so that its annual production capacity can reach two million tons. Lotte Chemical is running an NCC in Daesan, South Chungcheong Province and its annual ethylene output is 1.1 million tons.
In the meantime, oil refining companies are planning to expand their NCCs by 3.05 million tons from this year to 2024 and the scale is more than twice the expansion planned by petrochemical companies.
For instance, Hyundai Oilbank and its subsidiary Hyundai Chemical are building a heavy feed petrochemical complex to enhance the productivity of petrochemical products with oil refining by-products. The construction will be completed in the first half of this year and the complex will produce 750,000 tons of ethylene , 400,000 tons of propylene, 850,000 tons of polyethylene, 500,000 tons of polypropylene and 150,000 tons of butadiene a year.
GS Caltex is building a mixed feed cracker for olefin production to produce 700,000 tons of ethylene and 500,000 tons of polyethylene a year. The total construction cost is 2.7 trillion won. S-Oil recently announced that it would build ethylene production facilities with an annual capacity of 1.5 million tons by investing approximately five trillion won.
At present, the oil refining companies are selling the naphtha resulting from their crude oil refining processes to chemical companies. The construction projects are to produce petroleum products, such as ethylene, on their own instead.
Under the circumstances, South Korea’s annual ethylene production volume is estimated to increase from 9.61 million tons to 12.55 million tons this year and to 14.15 million tons in 2024. The same trend is being witnessed in China, raising the possibility of a global oversupply. When it comes to ethylene, the global supply and demand are predicted to increase by 59 million tons and 38 million tons from 2019 to 2024, respectively. As a result, the capacity utilization is likely to fall from 90.5 percent to 83.4 percent in that period.