Lotte Chemical Corp. held a ceremony marking the dedication of a gas chemical complex named Surgil in Uzbekistan on May 21.
The event headed by Korean Prime Minister Hwang Kyo-ahn and Uzbekistan Prime Minister Shavkat Mirziyoyev, as well as corporate officials, took place as a result of Lotte Group Chairman Shin Dong-bin’s 11 years of efforts to complete the huge project. He visited the project site in Uzbekistan twice to inspect the progress.
He also did his share to boost ties between Korea and Uzbekistan by laying the groundwork for President Park Geun-hye’s visit to the Central Asian country in June 2014, and the project gained speed since then.
The chairman claimed that the Surgil Project is the fruit of close cooperation between the governments of the two countries and is an example of the successful and representative mix of technologies of the civilian sectors of the involved companies. Lotte Chemical had a hand in the construction of the first petrochemical complex in the Eur-Asian continent, he said.
“The company established a bridgehead to advance into Russia and North Africa as well as Central Asia, including the CIS region, through this project,” said the Lotte Chairman. Lotte Chemical became the first Korean chemical company to have constructed a huge petrochemical complex, as big as 140 football fields, in Central Asia.
It completed construction of the petrochemical processing plant in September last year and kicked off with commercial production January this year. The mammoth project began with the heads of both Korean and Uzbeck governments signing an MOU for the project back in 2006.
The complex is located about 1,300 kilometers northwest of Uzbekistan’s capital Tashkent and also nearby the Surgil gas field, making it possible to procure methane gas to process high-density polyethylene and polypropylene at low production cost. The high-density polyethylene is used to make industrial pipes and cables, and polypropylene makes fabrics and clothes. The new petrochemical complex turns out 390,000 tons of high-density polyethylene and 80,000 tons of polypropylene annually. It’s exported to Turkey and former CIS countries in Central Asia.
The high transportation cost is a disadvantage for the sale of the products from the complex, but it is offset by low production costs at the complex, said President Huh Soo-young of Lotte Chemical. The complex will continue to be competitive so long as the oil price stays around $40 per barrel, the president said.
The Surgil project was commenced in March 2006 after the heads of Korea and Uzbekistan agreed to form a strategic alliance between the two nations. In 2007, state-owned Korea Gas Corp. (KOGAS), Lotte Chemical, and GS E&R Corp. formed a consortium to work together with Uzbekistan’s state-run oil and gas provider Uzbekneftegaz National Holding Co. (UNG). The Surgil project is worth about $3.89 billion in total, and UNG has 50 percent stake and the other half is owned by the Korean consortium - 24.5 percent by Lotte Chemical, 22.5 percent by KOGAS, and 3 percent by GS E&R. Lotte Chemical invested $383 million into this project.
Lotte Chemical’s new petrochemical complex has high logistics costs, but it expects low production cost to offset the disadvantage. “The products from Uzbekistan plant will be competitive enough if the international oil price stays over $40,” assured Huh Soo-young, Lotte Chemical president and chief executive officer after the completion of the Uzbekistan petrochemical plant last year.
Separately, Lotte Chemical, together with the United States-based Axiall Corp, is also building a shale gas-based ethane cracker in Lousiana, the U.S., and aims to complete the construction by 2018.
The Korean petrochemical firm owns 90 percent stake in the project amounting $3.09 billion and expects to generate $1.5 billion in sales every year from 2019.
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