Overview

Kumho Petrochemical Co., Ltd. is multinational chemical company based in South Korea, with headquarters in Seoul. Founded in 1970, when Kumho Group struggled to secure raw materials for its bus and tire businesses, Kumho Petrochemical has developed global market leadership in manufacturing of synthetic rubbers and the world’s largest production capacity. It focuses on synthetic rubbers, synthetic resins, specialty chemicals, electronic chemicals, energy, building materials and advanced materials as its core business. 

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Rationale 

After six months of internal discussion, the company made the decision to expand into the international markets for the purpose of sourcing butadiene, a simple conjugated diene and an important industrial chemical used as a monomer in the production of synthetic rubber.  The largest butadiene-consuming region is NE Asia, which absorbs up to 50% of total global production. The demand in this region is growing faster than any other region on the back of a growing automotive and tire market. This growth has driven demand for synthetic rubber and its constituent, butadiene, ever-higher. Simultaneously, the shift in ethylene production from a naphtha base to an ethane base has seriously affected butadiene supply.

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The company also wanted to source industrial quantities of C-4 or Composition C-4, a common variety of the plastic explosive family known as Composition C. The British version of the explosive is known as PE-4 (Plastic Explosive). C-4 comprises explosives, plastic binder, plasticizer (to make it malleable) and usually a marker or odorizing tagger chemical. C-4 has a texture similar to modeling clay and can be molded into any desired shape. C-4 is stable and an explosion can only be initiated by the combination of extreme heat and shock wave from a detonator.

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Solution 

While regional GCC ethylene capacity has increased significantly in recent years, butadiene capacity has not increased as much. Additionally, while considerable amounts of C4 are being recycled to be cracked and co-cracked, these products are frequently hydrogenated because butadiene derivative industries cannot meet the demand.  We used our proprietary relationships withe the Sultanate of Oman, specifically the Ministry of Energy, to create a soft landing for Kumho in-country. The rationale behind us choosing the Sultanate as opposed to the neighboring countries was twofold: the new development of their midstream and downstream business lines through Orpic and Oman Oil as well as the development of Sohar and Duqm, the new petrochemical complexes in the country. 

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What derived from the subsequent talks between the entities was as follows: Oman Oil, through its network, will support  Kumho to acquire the feedstock (C-4) from different sources. The feedstock will then be stored in Duqm, as a logistics port, to be aggregated and shipped back to Korea, until such time as Kumho can utilize Duqm refinery for its supply. Kumho and Oman Oil will form a downstream joint venture for new plant construction for the purpose of creating long-term off-take for both products.

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