'Petrochemical Specialty R&D Pre-Feasibility Exemption' to Be Announced This Month

Government Roadmap, Originally Scheduled for November, to Be Released in Third Week of December
Large-Scale R&D Package Prepared to Accelerate Shift to High Value-Added Products
NCC Business Restructuring Linked... "No Support Without Reduction"

The government will announce a large-scale R&D package this month, exempt from the preliminary feasibility study (pre-feasibility study), to shift the focus of petrochemical research and development (R&D) to specialty (high value-added) products. The release of the "Chemical Industry R&D Roadmap," originally scheduled for November, has been rescheduled to the third week of December to align with the enactment of the Special Act on Strengthening and Supporting the Competitiveness of the Petrochemical Industry (Petrochemical Special Act).

According to the government and industry on the 4th, the Ministry of Trade, Industry and Energy plans to present an R&D direction in this roadmap that centers on the development of new specialty technologies. An official from the Ministry stated, "We are setting the overall R&D direction for the petrochemical industry," and added, "We will prioritize support for new specialty projects." Both existing producers and new entrants will be eligible for support for specialty items included in the roadmap. Companies are expected to propose and win contracts for new specialty technology development projects directly.

Kim Jeonggwan, Minister of Trade, Industry and Energy. Photo by Kim Hyunmin

Under the current system, large-scale R&D projects with a total project cost of 50 billion won or more and government support of at least 30 billion won must undergo a pre-feasibility study. This is a preliminary review process by the Ministry of Economy and Finance to verify the economic viability and necessity of the project. Depending on the evaluation, this process usually takes nearly a year. The exemption from the pre-feasibility study in this roadmap is interpreted as the government's determination to accelerate the transition from general-purpose products to specialty products.

Once the specialty R&D roadmap is released, the government's "carrot and stick" strategy for the domestic petrochemical industry is expected to enter full swing. In August, the government and industry reached a consensus to reduce annual ethylene production by 2.7 million to 3.7 million tons, and naphtha cracking center (NCC) operators must submit business restructuring plans by the end of the year. On November 26, Minister of Trade, Industry and Energy Kim Jeong-Kag met with petrochemical companies in Yeosu and warned, "If you do not submit a restructuring plan by the end of the year, you will be excluded from government support."

At the Daesan Petrochemical Complex, Lotte Chemical and HD Hyundai Chemical have already agreed to restructure their businesses, while at the Yeosu Industrial Complex, Yeocheon NCC has effectively decided to shut down facilities with an annual ethylene production capacity of 470,000 tons. Specific incentives for reducing general-purpose products will be finalized through merger review and approval based on the restructuring plans submitted by the end of the year.