[The Industrial Heart Reborn] Asia's First Facility HPC Project, the Brilliant Transformation of the Refining Industry

K Manufacturing Industry Visits Site <2> Hyundai Chemical
Seosan Coastal Site 90% Complete
Product Production Planned from December
Finished Products Stored as Rice-Grain Shaped Solids
Utilizing Even Less-Used Heavy Oil
Synergy Boosted by Refining-Petrochemical Collaboration

The cracking furnace, considered a key facility of the Hyundai Chemical HPC project, is the equipment that first cracks raw materials such as naphtha. Currently, the project is 90% complete and is scheduled for completion in August. Photo by Hyundai Oilbank

[Asia Economy Reporter Choi Dae-yeol] "What kind of business can only we do, and what business can we be competitive in?"

The rosy future of the refining industry had faded long ago. Until a few years ago, demand for petroleum products was solidly supported not only in daily life but across industries, but as the energy industry landscape changed, perspectives on this smokestack industry completely reversed. The concerns of Hyundai Oilbank’s management stemmed from this background. The domestic refining industry is an oligopoly including Hyundai, SK, GS, and S-Oil, but Hyundai Oilbank, being relatively smaller in scale, had to operate more nimbly.

Refining Byproducts Reborn as Petrochemical Products... Full-Scale Production Starting in December

The HPC (Heavy Oil Petrochemical Complex) project of Hyundai Chemical, located in the Daesan Petrochemical Complex in Seosan, Chungnam, which we recently visited, is the fruit of such concerns. Hyundai Chemical is a joint venture established in 2014 by Hyundai Oilbank and Lotte Chemical. It was the first joint venture between a refining company and a petrochemical company in Korea. Construction began in 2018 with a total investment of 3 trillion KRW, and the current progress rate of the HPC project is about 90%. On a 670,000㎡ reclaimed coastal site next to existing refining facilities, large-scale petrochemical plant finishing construction was underway.

Unlike refining, which produces and supplies products in gaseous or liquid states, the storage facility for finished products in granular solid form is considered the largest automated warehouse facility in Korea. Park Sang-jo, Executive Director of Hyundai Oilbank’s Safety and New Business Construction Headquarters, said, "Mechanical completion is expected by the end of August, and commissioning will be possible from September. We plan to start producing products immediately by feeding raw materials from December."

One of the SDA processes, an advanced refining facility of Hyundai Oilbank. Photo by Hyundai Oilbank

HPC refers to a group of facilities that use heavy oil from crude oil refining processes to produce plastic materials such as polyethylene and polypropylene. The technology to crack (reheat and decompose) residual heavy oil from crude oil refining into such petrochemical products is patented by only a few companies worldwide, including ExxonMobil. Hyundai Chemical is the first in Asia to introduce such facilities.

Having HPC facilities makes it easier to respond flexibly according to market conditions. Existing companies produce synthetic resin raw materials only from byproduct gases such as naphtha or liquefied petroleum gas (LPG), but HPC can also utilize less commonly used heavy oil. Once the plant is fully operational, the company plans to produce about 1.35 million tons annually of polyethylene and polypropylene.

Currently, the plan is to produce up to one-third of the raw materials from heavy oil depending on market conditions. This flexible supply system can adjust according to raw material price situations, and the production line is subdivided into five units to manufacture various products, which is another advantage of HPC. Products such as ultra-high molecular weight polyethylene (UHMWPE), which can be used as battery separator materials expected to grow in the future market, ethylene vinyl acetate (EVA), and MTBE raw materials used to increase gasoline octane ratings will also be produced here.

Refining-Petrochemical Collaboration, a Breakthrough for ‘Crisis Escape’

Although petroleum as an energy source is fading, petroleum used to make materials necessary for daily life remains an irreplaceable resource. As signs of the COVID-19 pandemic easing appear, consumer goods demand is expected to surge worldwide. The rising prices of petrochemical products such as naphtha, the raw material for plastics, are in the same context. This is why refining companies are turning their attention to petrochemical businesses.

With environmental regulations expected to tighten further and sudden variables like COVID-19 causing a sharp drop in petroleum product demand, the survival concerns of the refining industry have become more urgent. While quarterly losses in the trillions of won represent an immediate crisis, the forecast that many demand sectors using petroleum as fuel will disappear in the near future is a matter directly related to the industry's survival.

Other refiners might be interested in such a business but hesitate to take the plunge. This is because it requires not only technology but also massive additional facility investments. Executive Director Park explained, "The SDA process to filter asphaltene components from residual oil can be established for about 200 to 300 billion KRW, but to have the entire thermal cracking process (DCU) that eliminates byproducts and re-extracts light oil requires over 1 trillion KRW. Thanks to having advanced facilities early on, our burden is relatively lighter."

Hyundai Oilbank was ahead domestically by installing heavy oil cracking facilities in the 1980s, which was rare at the time. Having experience as Korea’s first private refining company and even operating petrochemical businesses directly helped in deciding new ventures. The know-how of operating joint ventures between raw material suppliers and consumers, now mainstream, is also considered a great asset. Since refining and petrochemical industries can maintain stable raw material supply chains and customer bases that consistently use their products, collaboration through joint ventures has become frequent recently.

Hyundai Chemical, regarded as Korea’s first refining-petrochemical joint venture, has been producing mixed xylene since 2016, which is praised for domesticating aromatic raw materials that Korea previously mostly imported. Executive Director Park said, "Unlike many refiners, we have been conducting large-scale facility investment projects in recent years. The HPC project is a way to maximize production capacity by utilizing existing facilities while incorporating our unique know-how."