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Hyundai Engineering and Técnicas Reunidas awarded contracts for PKN Orlen’s major petrochemicals project

| By Mary Bailey

PKN Orlen (Płock, Poland) has signed a final contract with the contractor for Europe’s largest petrochemical project in 20 years. Hyundai Engineering Co. (Seoul, South Korea) and Técnicas Reunidas S.A. (TR; Madrid, Spain) will be responsible for building the main units of Olefins Complex III. This key project implemented under PKN ORLEN’s Petrochemical Development Program will add some PLN 1 billion (around $260 million) to the company’s annual EBITDA. It will also offer environmental benefits, with carbon dioxide emissions per ton of product expected to fall by as much as 30% once commercial operations start in 2025. The complex will be built at the site of the Production Plant in Płock and will cover an area of almost 100 ha, or 140 football fields.

The petrochemical products manufactured in the Olefins Complex will be the basis for producing all kinds of everyday items, such as cleaning, hygiene and medical products, as well as synthetic fibres for the production of protective clothing and masks. They will also be used to produce car parts, components of household appliances and electronic devices and so on.

The implementation of this strategic project has been greenlighted by the PKN ORLEN Supervisory Board which, in granting the consent, took into account the submission of an application for public aid to the Ministry of Development, Labour and Technology. The project’s value is estimated at PLN 13.5 billion, based on a lump-sum bid for the Steam Cracker and the related units, as well as detailed estimates of expenditure on the necessary infrastructure. The plan for the project has been prepared in line with the world’s best practices.

‘We appreciate the trust PKN ORLEN has placed in us by contracting us to deliver such a large and complex project. Our track record and world-class engineering standards will allow us to successfully complete the project,’ said Chang Hag Kim, Hyundai Engineering CEO.

‘We are pleased to have been selected by PKN ORLEN to implement Central Europe’s largest petrochemical project. It’s an honour but also a responsibility to deliver the best possible outcomes. We have a proven track record of delivering turnkey projects that we intend to fully harness,’ said Miguel Paradinas, Deputy CEO and Corporate General Director of Técnicas Reunidas.

Expansion of the Complex will be the first project of this type carried out in Europe in recent years. Other European companies have also noticed the potential represented by base petrochemicals and announced plans to expand their olefin production capacities. However, thanks to its effective project preparation and contracting strategy, PKN ORLEN has outpaced the competition by over 12 months and it will be the first to address the shortage of base products on the market.

The expansion of the Olefins Complex will make it possible to leverage the economies of scale, which are vital for PKN ORLEN’s competitiveness. At present, the Company has a 5% share in the European petrochemical market. Once the project comes on stream, the share will increase to 6.4%. In this way, PKN ORLEN will consolidate its leading position in Central Europe and join the group of the largest petrochemical producers, such as Dow, Sabic, Ineos or BASF.

Currently, the Steam Cracker’s capacity is 640,000 tons/yr. The Olefins III project envisages increasing its actual production capacities to 1,040,000 tons/yr — an approximately 60% increase. The ORLEN Group’s total petrochemical output, currently amounting to more than 5 million tons, will grow by over 1 million tons.

The implementation of the project marks a significant step towards strengthening the Płock Production Plant’s petrochemical segment. The project is due for completion in 2024. Following production launch, scheduled for early 2025, the share of crude oil used to manufacture petrochemical products in Płock will rise from 14% to 19%. This is all the more important given an expected drop in demand for refinery products and an expected increase, by as much as 80%, in demand for high-margin petrochemicals by 2050.

As part of the project, PKN ORLEN will consider shutting down the part of the olefin plant which was built over 40 years ago, with an ethylene production capacity of about 340,000 tonnes and lower operational and energy efficiency. The more modern part, with a capacity of about 300,000 tons of ethylene, is to be upgraded. Most importantly, however, PKN ORLEN will build a new Steam Cracker with a capacity of 740,000 tons of ethylene. Once the expansion of Olefins III is completed, the petrochemical plant in Płock will need around 1 million tonnes of additional feedstocks, which will be selected so as to maximise margins. The additional streams will come from the Płock refinery and other ORLEN Group refineries, as well as from the market in which Grupa LOTOS is a participant.

The Complex will comprise five additional production units: a new large ethylene oxide and glycol plant, a pyrolysis gasoline hydrogenation unit (PGH), an ethyl tertiary-butyl ether unit (ETBE), a styrene unit, and a generator unit (SGU). Once completed, Olefins Complex III will additionally increase PKN ORLEN’s capacity to produce other ethylene derivatives, delivering an extra margin and maximising the rate of return.