A petrochemicals joint venture between South Korea's SK Global Chemical and Chinese state-controlled oil company Sinopec has agreed to buy the 170,000 b/d Wuhan refinery in Hubei province, securing feedstock supplies from which to make its products.
The joint venture Sinopec-SK Wuhan Petrochemical will acquire the refinery from Sinopec for about 2.2 trillion won ($1.9bn). SK Innovation, which is South Korea's largest refiner and parent of SK Global Chemical, said its board approved the deal yesterday, giving SK the rare role of an Asia-Pacific company outside of China having a direct role in owning and running a Chinese refinery. The deal is in keeping with the Chinese government's strategy of integrating the country's refining and petrochemical industries.
Sinopec will pay W352.6bn up front, while SK Global Chemical will contribute W189.8bn, reflecting their joint venture's 65:35 ownership. The remaining W1.66 trillion will be financed through borrowings.
The joint venture expects to boost profits from owning the Wuhan refinery because it will be making ethylene and other products made from naphtha produced at its refinery. It already owns the ethylene cracking operations at Wuhan.
Wuhan yielded an operating profit of about W350bn in the past two years and aims to raise this with the completion of an expansion and upgrade project in 2020, boosting its production capacity to 3mn t/yr from 2.2mn t/yr. Ethylene capacity will rise to 1.1mn t/yr from 800,000 t/yr. Sinopec said the plant has a slate of 25 products, including gasoline, kerosine, jet fuel, light diesel, naphtha, napthenic acid, petroleum coke and MTBE.
Sinopec-SK Wuhan Petrochemical, which produces ethylene, polyethylene and polypropylene, has generated combined operating profits of W2 trillion on sales of W13.3 trillion since starting up in 2014.
