Bloomberg News

SK Energy Will Take 25% Stake in Venture With Sinopec

May 26, 2008

SK Energy Co., South Korea's biggest oil refiner, will take a 25 percent stake in a planned chemical venture with China Petroleum & Chemical Corp. (386), the Chinese oil company said.

The partners will sign an agreement on the Wuhan project on May 28 Wang Tianpu, president of Sinopec, as China's biggest oil refiner is known, said in Beijing today. The signing will coincide with a visit to China by South Korean President Lee Myung Bak.

China, the world's fastest-growing major economy, wants to increase oil-processing capacity by 25 percent by 2010 to meet rising consumption of fuels and petrochemicals. SK Energy and Sinopec will set up a joint venture and initially invest 1.9 trillion won ($1.8 billion), Munhwa Ilbo reported last week. SK Energy is adding capacity in China to tap increasing consumption of chemicals.

China plans to more than triple its annual ethylene producing capacity to 18.13 million metric tons by 2010. Sinopec signed an initial accord with the South Korean company to jointly build the project, Shu Chaoxia, deputy chief engineer of China Petrochemical's economic and technical research institute, said in June.

The plant, the first large-scale refining and chemical production base in central China, will be able to produce 800,000 tons of ethylene a year, the National Development and Reform Commission said in April 2007. It's scheduled to become operational by 2010, Shu said at the time.

Separately, Saudi Arabian Oil Co. will take a 25 percent stake in Sinopec's Qingdao refinery project, Wang said today.

Kuwait Petroleum Corp. will join Sinopec to build a refinery in Southern China, Wang said. Dow Chemical Co. (DOW:US) and Royal Dutch Shell Plc (RDSA) are among other possible participants, he said.

Sinopec will submit a feasibility study on the project, proposed for Guangdong province, to the government this month, Chairman Su Shulin said at the company's annual general meeting today.

To contact the reporter on this story: Wang Ying in Beijing at wang30@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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