SK Energy to Participate in
Ethylene Joint Venture in China

Implements the biggest-ever projects in its policy to capitalize on China's domestic demand

Implements the biggest-ever projects in its policy to capitalize on China's domestic demand SK Energy will be the first Asian company to establish an ethylene joint-venture plant in China.
SK Energy has signed a framework agreement with Sinopec Corp. to set up the joint-venture with an annual capacity of 800,000 tons of ethylene in Wuhan City, Hebei Prefecture.
Those on hand at the signing ceremony held in Beijing on May 28 included Korean Minister of Knowledge and Economy Lee Youn-ho and his Chinese counterpart and SK Energy Vice Chairman Shin Heon-cheol.
SK Energy and Sinopec will ink a contract on the joint venture within the year. SK Energy has a 35 percent interest in the project.
The projected Wuhan ethylene plant, which is to begin operation in late 2011, will produce 300,000 tons of high-density polyethylene (HDPE), 300,000 tons of linear low-density polyethylene (LLDPE), 400,000 tons of polypropylene (PP) as well as 800,000 tons of ethylene.

SK Energy's joint venture project is part of the Korean energy company's so-called "China Insider"strategy to venture into China in the form of localized firms, a move designed to expand exports and step up its overseas presence.
In particular, SK Energy's latest project in China comes in line with Chairman Chey Tae-won's long-standing stance that China is a huge market with immense potential. SK Energy should become a company that can post growth through collaboration with China. SK Energy's policy of regarding China as Korea's second domestic market and its asphalt projects have yielded tangible outcomes, providing SK Energy with opportunities to recognize its competitive edge in the Chinese market.
Because of the requirements of massive capital and accumulated technologies, only a few multinational corporations, including BP and Exxon Mobil, have entered the Chinese market with their production bases located in China's eastern coastal area. It is noteworthy that the latest joint venture will be built in the central inland area, so the Chinese government hopes the projected ethylene plant will touch off increased growth in the central region in line with China's pursuit of balanced development of the region.
A Sinopec official said, "This project will likely help meet the domestic demand for ethylene and contribute to the balanced development of the central region, and both companies will strive to make the joint venture a win-win project by faithfully implementing relevant preparatory projects."An SK Energy official said, "The project is the biggest achievement SK Energy has made in China and Chairman Chey's long-standing efforts to enter China have begun to pay off. SK Energy will put more energy into making the ethylene project a success to establish a foundation in China and utilize it as a bridgehead for expanding its presence in global markets."
COMPLETION OF START-UP OPERATION OF NO. 2 FCC
SK Energy announced on June 15 that the No. 2 fluidized catalytic cracking (FCC) facility, whose construction cost the energy company an aggregate 2 trillion won, has been put into full-fledged commercial operation after an initial start-up operation.
The FCC facility project broke ground in January 2007 and was completed this past March. The facility is designed to produce valued added petroleum products using Bunker C-Oil as a catalyst.
The latest sophistication facility is capable of producing 60,000 barrels of value-added products including gasoline and diesel oil per day. The new FCC facility brings to 162,000 barrels per day the aggregate production capacity of SK Energy's sophistication facilities including the No. 1 FCC facility with a daily capacity of 57,000 barrels and the No. 2 Heavy Oil Upgrade (HOU). It also raises SK Energy's sophistication rate from a range of 9 percent to 14.5 percent.
Lee Sang-il, chief of the SK Energy Business Division, said, "The successful operation of the third sophistication facility shows off its world-class process operation and equipment technology prowess."SK Energy is now able to raise its supply capability and quality competitiveness in order to cope with the rapid structural change of petroleum products and the more stringent regulation of quality management, he added.
Meanwhile, SK Energy plans to launch a project to build its fourth sophistication facility with a daily capacity of 40,000 barrels scheduled to be complete by 2011. The addition would raise SK Energy's sophistication facility rate from 14.5 percent to 17.6 percent. nw

(right) SK Energy Vice Chairman Shin Heon-cheol and SK Energy's refinery sophistication facilities