【Haichuan Chemical Salary News】Wuhan Petrochemical and Korea-China Petrochemical have merged!

This partnership was established 6 years ago, as a collaboration between Sinopec and South Korea’s SK Group, two of the world’s top 500 energy giants. At the end of 2013, Sinopec and South Korea’s SK Group established a joint venture for the 800,000 tons per year ethylene project in Wuhan, which began operating commercially in January 2014. Over the past 6 years, the joint venture has achieved excellent production and operational results. According to the internationally renowned evaluation agency Solomon, the performance of the company’s ethylene plants is at the world’s leading level. While increasing production, the company has maintained accident-free safe and environmentally sustainable operations for 6 consecutive years. Its emissions of key pollutants have been significantly reduced, even below the **established standards, thereby achieving an increase in production alongside a reduction in emissions. To date, over 18,000 visitors have come to this garden-style joint venture featuring evergreen plants, herons wandering about, and external waterways suitable for fishing.

Thanks to this successful cooperation, senior executives from Sinopec and SK Group have vigorously promoted the Wuhan refining and chemical integration joint venture project. In June 2017, Sinopec and SK signed a letter of intent for a joint venture, aiming to integrate Wuhan Petrochemical’s refining operations into Sino-Korean Petrochemical for integrated operation. On April 29 this year, Sinopec and SK signed a joint venture agreement for integrated refining and chemical production as well as a capital increase agreement. The new joint venture (Sinopec 65%: SK of South Korea 35%) obtained its business license on May 31; on June 14, it completed the registration with the Ministry of Commerce and the renewal of its safety production license; on July 1, it officially began commercial operations. Wuhan Petrochemical is among the top 10 industrial enterprises in Hubei Province, while Zhonghan Petrochemical is among the top 20 industrial enterprises in the same province. Following the joint restructuring between Wuhan Petrochemical and Sino-Korean Petrochemical, it will become the largest energy and chemical industry joint venture in Hubei Province; it is also the largest joint venture between China and South Korea in this sector. A responsible official from Zhonghan Petrochemical stated that following the joint venture reorganization between Wuhan Petrochemical and Zhonghan Petrochemical, Wuhan Petrochemical’s production and operations will be integrated into Zhonghan Petrochemical. This joint venture restructuring will contribute to the comprehensive protection of the Yangtze River, help enterprises transform their operational mechanisms, enable more efficient use of resources, and enhance management efficiency as well as overall resilience to risks. This is not only a significant step taken by Sinopec to attract foreign investment for the reform of state-owned enterprises, but it is also an important measure to further expand openness

The new joint venture will share the advanced technologies as well as the successful management experiences and practices of both partners. The refining and chemical industries will see integration in terms of organization, systems, and management, while their production operations will be managed separately. In addition to increasing the registered capital, South Korea will also appoint several managers to senior management positions in the joint venture, so as to manage the new joint enterprise together with the Chinese side. After the joint venture restructuring, the company’s production and operational costs will also decrease significantly. In the past, Wuhan Petrochemical and China-Korea Petrochemical exchanged some raw materials with each other, which was considered a market-based transaction. After the joint venture is established, there is internal supply between the parties, resulting in a significant reduction in costs.

Wuhan Petrochemical is a super-large integrated refining and chemical enterprise directly under Sinopec Group. It is the largest oil refining and chemical production base in Central China. The company consists of Wuhan Branch of Sinopec Corporation and Wuhan Branch of Sinopec Group Asset Management Co., Ltd., and it is authorized by Sinopec Group to exercise shareholder rights regarding Zhonghan Petrochemical. The company was founded in 1971 and began operations in 1977. It covers an area of 239 hectares, has 1,900 employees on staff, and its total assets amount to approximately 10 billion yuan. The comprehensive refining capacity is 8 million tons per year, with 23 main production units that primarily manufacture chemical products such as gasoline, kerosene, diesel, polypropylene, liquefied gas, sulfur, and petroleum coke. Over the 41 years since its operation began, Wuhan Petrochemical Company has seen its asset size increase by 493 times, with a total of over 135 million tons of crude oil processed. In 2018, 8.61 million tons of crude oil were processed throughout the year, 5.137 million tons of refined oil were produced, and 874,000 tons of refining products such as polypropylene, sulfur, and coke were sold. The company achieved operating revenues of 42.6 billion yuan and paid 10.46 billion yuan in taxes and fees.

Sino-Korean petrochemical companies, including Sinopec and South Korea’s SK Group, carry out cooperation in areas such as crude oil trading and investment in refining and chemical processing projects. In 2013, the two parties established Sino-Korean (Wuhan) Petrochemical Co., Ltd. for the 800,000-ton ethylene project in Wuhan, which began commercial operations in January 2014. The 800,000-ton ethylene project of Sino-Korean Petrochemical is a key project under China Petrochemical’s 11th Five-Year Plan. It drives industrial output worth hundreds of billions of yuan in downstream sectors and creates over 100,000 jobs, filling the gap of the absence of large-scale ethylene projects in China’s central region. By the end of 2018, Sino-Korea Petrochemical had accumulated profits of over 10 billion yuan and paid approximately 7 billion yuan in taxes and fees, becoming a successful example of economic and trade cooperation between China and South Korea.

On June 29, the construction of Wuhan Petrochemical’s new 300,000-ton/year alkylation unit and related systems was completed, marking the transition from the construction phase to the operation phase for this facility. To meet the requirements for improved gasoline quality in the domestic market and to further enhance efficiency, Wuhan Petrochemical has invested in the construction of a new alkylation plant with an annual capacity of 300,000 tons. This plant utilizes the ionic liquid alkylation technology developed by China University of Petroleum (Beijing), and its main product is alkylated oil. The feasibility study for this device and its associated systems was approved in April 2017, while the preliminary design was approved in May 2018; the total investment for the project amounts to 448.4215 million yuan. The main unit of this device and its associated system adopts the EP+C mode, comprising components such as raw material pretreatment, reaction and sedimentation separation, and ionic liquid regeneration ； The system is implemented under an EPC management model, encompassing 6 individual projects including the renovation of thermal pipelines, the transfer of loads from chemical processing units, and the construction of new neutralization tanks. The general contractor for the construction is Sinopec Fifth Construction Company, with SEI, Wuhan Refining & Chemical Engineering Design Co., Ltd., Tianma Construction Group Co., Ltd., and others participating in the construction. The project began preliminary work of “three connections and one leveling” in July 2017, and civil construction started in May 2018. Wuhan Petrochemical is actively promoting the construction of standardized construction sites, utilizing intelligent safety systems for site management for the first time, and placing strong emphasis on the safety management of contractors ； Adhere to the three-level safety inspection system and risk identification at construction sites, strengthen project JSA management, and strictly implement the \"7+1\" special operation permits, risk identification, and safety measures at construction sites to ensure no accidents occur during the project construction period. The company places strong emphasis on quality process control, implementing total quality management, a system of producing sample units for construction quality, and initiatives to create high-quality projects, thereby laying the foundation for improving project quality and achieving excellence in construction.

Will the combined capacity remain at 8 million tons per year for refining and 800,000 tons per year for ethylene?

It seems that after the Wuhan Ethylene plant was built, SK invested a portion of the funds, and it was referred to as a \"joint venture\".

It follows a model similar to that of Sinopec and Shell, but its growth is doomed to be limited. Given the geographical location, it would be good to be able to produce high-value downstream olefin products.

Environmental capacity, geographical location, and new policies all impose restrictions; it’s unlikely that the scale will expand. Hopefully, achievements can be made in the downstream olefin processing sector.