Lotte Group Chairman Shin Dong-bin

Lotte Chemical’s construction of an ethylene glycol (EG) plant in Lake Charles Prince, Louisiana, the United States, is to be completed on a piece of land covering 1 million sq. meters, equivalent to the size of 150 soccer stadiums, in October.

The dedication of the plant draws a keen attention as it is capable of producing ethylene, an important chemical material, at prices 30 to 40 percent cheaper than conventional chemical plants. Despite pessimistic views that such a plant would be unfeasible as the price of crude oil plunged below $30 per barrel two years ago, Lotte Chemical made up its mind to launch the project in 2016.

Lotte Chemical’s decision has paid off, and it is expected to help the company rise to a global chemical player.

Ethylene, a basic material of such petrochemical products as plastic, timber and textiles, is produced through the cracking of naphtha, which comes from the refining of crude oil. So when crude prices go up, naphtha and ethylene prices also increase.

But Lotte Chemical’s EG plant in Louisiana is employing an innovative method of drawing ethylene from shale gas wells.

The United States, the most active country to exploit shale gas development, is aiming to max out shale gas use for the chemical industry. In particular, as international crude oil prices skyrocketed above $100 per barrel in the early 2010s, global chemical companies scrambled to venture into shale gas development projects.

In 2014, Lotte Chemical teamed up with Axiall to build the EG plant in Louisiana. As international crude oil prices plunged, many companies gave up projects. President Hwang Jin-gu of Lotte Chemical America said that even though crude oil prices plunged to $30 just before the groundbreaking, Lotte Group Chairman Shin Dong-bin had the guts to push the project.

As the progress of the project now stands at 97 percent and crude prices have soared to $80, looking back at the groundbreaking, it was felt like a dream, he said.

Lotte Chemical plunked down about $3 billion (3.4 trillion won) for the EG plant in Louisiana, the largest investment by a Korean chemical company in the state.

The company’s Louisiana plant is capable of producing 1 million tons of ethylene and 700,000 tons of EG, the first fabrication of ethylene, annually. When the Louisiana plant is dedicated, Lotte Chemical’s combined ethylene production in Korea and abroad will amount to 4.5 million tons, making the chemical company rank 1st in Korea, accounting for 2.6 percent of global ethylene production.

Even though he undergone the prosecution’s investigation into management malpractices in June 2016, Lotte Group Chairman Shin attended a ceremony to launch the EG plant in Louisiana. At that time, Shin said the project would serve as an opportunity for Lotte Chemical to rise to a global integrated chemical company.

As rival companies gave up projects, Lotte Chemical managed to secure essential equipment at cheaper prices. As crude oil continued to rise afterward, rival companies have belatedly begun to build similar plants, but it will three to four years to complete them. As a 2nd wave of shale gas is approaching due to rising crude oil prices, Lotte Chemical’s EG plant will likely post better profits, a Lotte Chemical official said.

Lotte Chemical’s Louisiana plant is praised as an exemplary case of economic cooperation between Korea and the United States. Lotte Chemical brought facilities worth about $500 million from Korea and assembled them in Louisiana.

Lotte Chemical has hired about 300 workers in the United States, and employees the company will hire after dedicating the plant will number 250.

A view of Lotte Chemical’s ethylene glycol production and ethan cracking plants in Lake Charles in the State of Louisiana, the U.S.(Photos: Lotte Chem)