Yeosu MFC to Begin Commercial Operation as Early as September
Producing Olefin-Based Chemical Products with Increased Demand Since COVID-19
Ethylene 750,000t, Propylene 500,000t Scale
[Asia Economy Reporter Hwang Yoon-joo] GS Caltex is expanding its reach into the olefin market, where demand has increased since COVID-19. It plans to start full-scale production of chemical products such as ethylene and propylene as early as September. Through this, the company aims to enhance profitability based on its core refining business.
According to industry sources on the 25th, GS Caltex recently began trial operations of its olefin production facility (MFC) at its Yeosu Plant 2. The current operating rate is maintained at around 80%, with plans to increase it to 90%. Commercial operations are expected to start as early as September. Once MFC commercial operations begin, GS Caltex will produce 750,000 tons of ethylene and 500,000 tons of polyethylene annually.
The MFC, like the naphtha cracking center (NCC), is a facility that produces basic petrochemical products such as ethylene, propylene, and BTX. The difference from NCC is that MFC uses feedstocks like ethane and liquefied petroleum gas (LPG), which are byproducts of crude oil refining, making it more cost-effective than NCC. This cost advantage can be beneficial when international oil prices fall or when oil demand decreases.
This project is significant as GS Caltex, which had been conservative about new investments, is shifting its focus from refining to the chemical business. It is a large-scale investment of 2.7 trillion KRW since 2018. The investment scale is comparable to SK Innovation’s investment in building its first and second electric vehicle battery plants in Georgia, USA.
The reason GS Caltex is making a large-scale investment in the chemical business is due to the bleak outlook for the oil business. According to the International Energy Agency (IEA), global oil demand (transportation oil) is expected to peak at 106.8 million barrels per day by 2030. This is due to the rapid growth of the electric vehicle market and the increase in remote work after COVID-19, which has reduced vehicle commuting. After the 2030s, petrochemical products are expected to drive oil demand instead of transportation fuels like gasoline and diesel.
Industry insiders agree that the investment in olefin (basic hydrocarbons such as ethylene, propylene, and butadiene) facilities reveals GS Caltex’s character. GS Caltex is known for taking a conservative approach to new businesses by ensuring they are linked to its core operations, while boldly executing large-scale investments.
According to data from the Chemical Economy Research Institute, demand for olefin-based chemical products has increased since COVID-19, while aromatic products (such as benzene, toluene, and xylene) have contracted. In 2020, domestic ethylene demand was 8.173 million tons, up 3.1% from the previous year. Propylene (7.262 million tons) and butadiene (1.591 million tons) also increased slightly by 1.1% and 0.8%, respectively. In contrast, aromatics such as benzene decreased by 3.7% (3.845 million tons), toluene by 5.5% (2.099 million tons), and xylene by 20.5% (3.767 million tons).
An official from the refining industry said, "GS Caltex is taking a completely different strategy from SK Innovation by overcoming the refining industry downturn through new businesses based on its core operations," adding, "This investment direction is expected to affect the market share within the domestic refining industry as well."
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