Hyundai Oilbank, a major player in the country’s refining sector, is seeking to diversify its oil business in an effort to secure additional financial sources of long-term profit.
The refiner has been actively extending segments into lubricant manufacturing, engine oil and the oil storage businesses in recent years, through joint ventures with international counterparts, including U.S. oil company Shell Oil Co. and Japanese refiner Cosmo Oil Co.
Hyundai Shell Base Oil, a joint venture that Hyundai Oilbank and U.S.-based Shell Oil Co. invested 60 percent and 40 percent, respectively, to begin construction of a new base oil manufacturing plant in Daesan, South Chungcheong Province, in January. Base oil is a basic material for making oil lubricants, and is made from refined oil.
Built upon a 3,300 square-meter tract of land, the plant is scheduled to start producing base oil products in mid-2014.
The Daesan plant will process about 20,000 barrels of base oil, which will be distributed to China and other Asian countries through Shell’s global supply network.
The joint company targets annual sales of around 1 trillion won ($900 million) in 2015, Hyundai Oilbank said in a statement. Besides Hyundai Shell Base Oil, the Korean firm has partnered with Japanese refiner Cosmo Oil, launching a joint venture for manufacturing benzene, toluene and xylene, which are used in making synthetic textiles and other goods, in Daesan.
The Hyundai-Cosmo joint venture has two BTX manufacturing plants. The second plant entered full operation in April, and is expected to raise Hyundai Oilbank’s annual production capacity of petrochemical products by up to 3 times from 500,000 tons to 1.5 million tons.
By expanding its BTX business, Hyundai Oilbank plans to stretch the proportion of its business accounted for by petrochemical product manufacturing to 14 percent, from the current 9 percent, as part of the company’s attempt to diversify its portfolio and sources of profit.
Hyundai Oilbank plans to export the petrochemical products mainly to China and Taiwan.
In addition to international joint ventures, Hyundai Oilbank entered some new independent businesses. The company newly added the engine oil business to its portfolio, by launching “XTeer,” the company’s first independently produced engine oil product for vehicles, starting this year.
The refiner plans to crank out about 180,000 barrels of XTeer In the first two years. The company said that it would eventually expand the lubricant business into heavy machinery and industrial machine sectors, distributing its lubricant products through its local network, which includes garages and some 2,400 gas stations nationwide.
Storage is another new business sector currently in the pipeline. Hyundai Oilbank is constructing storage facilities for oil and petrochemical products at a new harbor in Ulsan, on a vast 6,700 square-meter site, investing a total of about 100 billion won.
This includes an extra large wharf that can accommodate vessels of up to 50,000 tons, as well as some 40 oil storage tanks that can store a total of 300,000 kiloliters of oil.
The Ulsan facilities have advantages over Japanese ports and local ports in Yeosu and Pyeongtaek, which are either shallow-watered or prone to earthquakes, considering the proximity to petrochemical plants in the region, the refiner said.
By Chung Joo-won ()
koreaherald@heraldcorp.com
