Hyundai Oilbank signed a joint venture contract with Shell Oil to set up and run an oil plant with the capacity to produce 20,000 barrels of base lube oil daily when it is completed in 2014, the company said recently.

The signing took place at the Shangri-la Hotel in Singapore on Feb. 7 in the presence of President Kwon Oh-kap of Hyundai Oilbank and President Mark Gainsborough of Shell Eastern Co.

Under the agreement, the two partners will set up Hyundai-Shell Base Oil Co. in March to build and run the projected lube oil company, which is to be built inside the Hyundai Oilbank compound in Daesan, South Chungcheong Province, targeted for completion in the second half of 2014. The construction cost is estimated to run around 400 billion won with the Korean partner holding a 60 percent stake along with the management rights and Shell retaining a 40 percent stake.

The two partners agreed that most of the base lube oil produced at the new plant will be supplied to Shell's lube oil plants in various parts of the world and exported to foreign countries including China through Shell's global sales network.

Hyundai Oilbank projects to receive over 80 billion won annually from sales of 700 billion won when the new lube oil plant goes on stream in 2015.

It will be the first time for Hyundai Oilbank to set up a lube oil plant and produce a base lube oil, in addition to its other petroleum businesses including the BTX joint venture plant with Cosmos Oil of Japan and an oil storage terminal in Ulsan, South Gyeongsang Province, all high value-added businesses that the oil refinery set out to take on since its affiliation with Hyundai Heavy Industry (HHI) a year and half ago.

President Kwon said Hyundai Oilbank has been working on building a stable operational base to change its operation, which is too dependent on oil refining, since its affiliation with HHI in August 2010, and a base lube oil plant will be a starting point for the oil refinery's endeavor to become an integrated energy company in the future.

In the meantime, Hyundai Oilbank opened its Central Technology Research Institute in Pankyo, Gyeonggi Province, on Feb. 1 to back up its BTX, base lube oil, and propylene businesses in the area of technology research as the oil refinery tries to expand its business portfolio.

The research institute set up in the Pankyo Techno Valley will be engaged in the development of new technologies, base lube oil, propylene, and next generation fuel and other diverse areas and also the training of next generation technology personnel for the company.

The new research center will absorb all research personnel spread around the oil refinery's facilities in Seoul and Busan, among other cities in Korea, and the oil company will launch shuttle buses from the Daesan Complex to Pankyo every day. 

The oil refinery plans to sign cooperative agreements with universities, foreign firms, and other related firms on research in the oil and petrochemical areas. Hyundai Oilbank signed an MOU with Cosmos Oil of Japan, a j.v. partner in its BTX production business, on technology cooperation involving research and exchange of personnel. The two partners have already discussed the issues related to personnel exchange including the periods and means of support, among other matters, early this month. The firms also agreed to set up a technology cooperation committee to discuss the extent of technology cooperation between them.  nw