SK Innovation has revealed that Wutan Petrochemical, a joint venture between the SK Innovation subsidiary, SK Global Chemical and China’s largest oil company Sinopec, has decided to commit a KRW 740 billion investment to increase its production by 40%.
* This investment is an internal investment from profits generated by Wutan Petrochemical and is not a direct investment from its shareholders, SK Global Chemical and Sinopec

With this expansion, Wutan Petrochemical will provide an increased production yield per year, adding 0.8 million tons to its annual production and increasing its annual production to 1.1 million, 0.9 million, 0.7 million for ethylene, polyethylene, polypropylene, respectively. The total annual production of Wutan Petrochemical is expected to increase and reach the 3-million-ton mark. The expansion is slated to be completed by 2020, and will immediately work toward mass production after the completion.

With the Chinese production of ethylene and its derivatives expected to remain at about 60% by 2020, Wutan Petrochemical’s expansion is interpreted as a strategic decision to acquire a basis for preemptive marketing.

The expansion will be in the form of a revamp, in which existing production facilities are improved, modified, or streamlined instead of creating a new production facility altogether. Revamps tend to be more cost-efficient than new construction, and the new investment plan will likewise offer an additional production of 0.8 million tons, with only 60% of the costs of new construction.

Wutan Petrochemical, the most successful global partnership undertaken by SK Innovation, was established in October 2013, with the joint investment of KRW 3 trillion 300 billion from SK Global Chemical and Sinopec in a 35:65 ratio. It is the largest petrochemical joint venture since the opening of diplomatic relations between Korea and China. It has accumulated a steady success trend, generating a surplus from the very first year.

On top of that, Wutan Petrochemical is often cited as one of the most successful examples of a joint venture in China, with highuation across the fields of management, productivity, efficiency, and safety. It has also contributed greatly to the Chinese national economy and the regional economy of Hubei Province. As the largest petrochemical companyd in Hubei Province, Wutan Petrochemical is the largest contributor of tax revenue to the provincial government.

SK Global Chemical has focused on developing new business opportunities and generating further growth drivers in China, with the goal of growing as a prominent chemical marketing company in the Chinese market. The most important component of this venture is its partnership with Sinopec. As such, SK Global Chemical has focused its efforts on working out the mutually beneficial arrangements that utilize the resources of the two parties in the most optimal way.

CEO Jun Kim of SK Innovation commented: “The investment by Wutan Petrochemical was only made possible with a strong, unified will toward mutual growth and trust between SK and Sinopec.”