Hyundai Oilbank said Tuesday it will jump into the lubricant base oil business by establishing a joint venture with Shell Petroleum Co. next month.

With plans to start production in the latter half of 2014, the joint venture, named Hyundai and Shell Base Oil Co., will break ground on a factory in October.

Lubricant base oils, also known as base oils, are the primary hydrocarbon components of industrial lubricants such as engine oil, transmission fluid, hydraulic fluid, gear oil and metal working oil.

In a related effort, Hyundai Oilbank’s chief executive Kwon Oh-gap and Shell’s Mark Gainsborough signed an agreement to jointly dive into the lubricant base oil business, with a daily production capacity of 20,000 barrels.

Hyundai Oilbank will contribute 60 percent of the funding, while Shell will take up the remaining 40 percent for the establishment of the new joint venture. A factory for the venture will be built in Daesan, South Chungcheong Province, according to officials at the Korean company.

Hyundai Oilbank expects to take in more than 700 billion won ($625.67 million) in sales by 2015 and gain an additional yearly profit of 80 billion won by entering overseas markets, including China and other Asian regions, with its new lubricant base oil business.

By Cho Ji-hyun (sharon@heraldcorp.com)