South Korea’s second-largest oil refiner GS Caltex Corp. will invest 2.6 trillion won ($2.31 billion) by 2021 to add an olefins plant at its manufacturing base in the southern coastal city of Yeosu to broaden its petrochemical business.

The Korean company signed an agreement with South Jeolla provincial government on Thursday to build an olefins manufacturing plant, or mixed feed cracker, on a site of 462,000 square meters near its second refinery.

The new plant will produce 700,000 tons of ethylene and 500,000 tons of polyethylene a year, which will be supplied to petrochemical plants at home as well as countries including China, Japan and the United States.

When completed, the new olefins factory is expected to add 400 billion won to the firm’s operating profit every year, according to GS Caltex. It is estimated to create about 2.6 million new jobs a year during the construction stage and 500 more jobs once it enters into operation, with production output expected to reach 1 trillion won.

Olefins are a chemical compound produced through thermal cracking of crude oil, a process in which hydrocarbons are broken down into smaller molecules. They are essential in making synthetic resin, rubber and fiber and are used in a wide range of applications, from automotives and electronics to construction and pharmaceuticals. As of late 2017, the global olefins market produced about 260 million tons of olefins, with polyethylene making up the dominant 38 percent.

GS Caltex’s refinery produces gasoline, diesel fuel, kerosene, lubricants and other useful products from crude oil, meeting 30 percent of the country’s total petroleum demand. It has a refining capacity of 790,000 barrels per day for crude oil and boasts the country’s largest refinery capacity of 274,000 barrels per day for heavy crude oil.

According to its parent company GS Holdings Corp. on Thursday, GS Caltex’s operating profit for the second quarter ended June soared 178.4 percent on year to 584 billion won on revenue of 9.06 trillion won, up 30.4 percent on rising international oil prices that have improved the company’s refining margin and stabilizing supply following the completion of facility maintenance works.

By Lee Dong-in and Kim Hyo-jin

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