Hyundai Oilbank to expand aromatics capacity

South Korean refiner Hyundai Oilbank is undertaking 260bn won ($222.2mn) in projects to expand its aromatics production capacity, in a bet that an increased weighting toward petrochemicals will boost its profitability.

The first of the two projects is under way at Hyundai Chemical, a 60:40 joint venture between Hyundai Oilbank and South Korea's Lotte Chemical. The venture is expanding its capacity to produce mixed xylene to 1.4mn t/yr from 1.2mn t/yr. The project will cost an estimated W100bn, and work is scheduled to be completed this month.

The remaining W160bn is budgeted for an expansion of paraxylene (PX) output at Hyundai Cosmo Petrochemical, a joint venture between Hyundai Oilbank and Japan's Cosmo Oil. PX capacity will be increased to 1.36mn t/yr from 1.18mn t/yr, and construction is scheduled to be completed in June 2020.

Both aromatics ventures are located at Hyundai Oilbank's refining complex in Daesan, south of Seoul. Hyundai Chemical operates a 130,000 b/d condensate splitter, which opened in 2016, to produce mixed xylene and light naphtha. Its mixed xylene output is supplied to Hyundai Oilbank and Lotte Chemical as a feedstock for their benzene-toluene-xylene (BTX) plants. The joint venture has not said how much its benzene output may increase as a result of the mixed xylene expansion.

Hyundai Oilbank and Lotte Chemical just last month reached final agreement on plans for Hyundai Chemical to build a new W2.7 trillion petrochemical plant in Daesan. The complex will be fed by heavy fuel oil and have a capacity to produce 750,000 t/yr of ethylene, 750,00 t/yr of polyethylene and 400,000 t/yr of polypropylene. Construction is scheduled to be completed in the first half of 2021.

By 2022, after the new olefins operation comes on stream, Hyundai Oilbank expects to generate half of its operating profit from petrochemicals, up from around 25pc currently. But South Korean downstream firms also face a risk of market gluts. The country's refiners and petrochemical companies are in the midst of projects that will increase their ethylene production capacity by more than half, to almost 14mn t/yr, by 2023.

Rival refiner S-Oil, for instance, late last year completed a W4.8 trillion residue-upgrading and olefin-downstream complex, and it plans by 2024 to build a $6bn steam cracker and olefins unit.

Both S-Oil and Hyundai Oilbank are backed by Saudi Arabian oil giant Saudi Aramco. The state-run company, which is investing heavily in petrochemicals, owns a majority interest in S-Oil and this year acquired a 17pc stake in Hyundai Oilbank.