SK, Nippon Oil Ally on Lubricants

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South Korean base oil refiner SK Corp. last week announced a strategic alliance with Nippon Oil Corp., Japans largest oil company, saying potential benefits in the lubricants field include exchange and lease of lube base oil and co-utilization of lube blending facilities to build a stable and efficient worldwide supply system of lubricants.

Y.D. Chae, general manager for SK’s lubricants overseas marketing team, told Lube Report the amount of base oil swapped between the two companies will depend on thesituation of both companies.”SK will supply Group III base oil to to NOC Japan, and NOC will supply Group I base oil to SK Korea,” Chae said. “SK will supply Group III base oil to NOC worldwide plants.”

Chae said the two companies are also discussing conditions for toll blending that would benefit both companies. “NOC will have the toll blending for SK through NOC blending plants in USA and China,” he explained.

Shiegetaka Toyono, president of Nippon Oil U.S.A., told Lube Report the alliance is a logical outgrowth of Nippon Oils shift in emphasis to the lubricants industry in recent years, with potential benefits for each company. The relationship between our two companies has been nothing but good, he said, adding that meetings to discuss the possibility of a cooperative alliance began in earnest in 2004. Toyono emphasized Nippon Oil continues studying the alliance terms, and that the two companies would each need to agree upon conditions and philosophies for any cooperative measures.

As of now, if certain conditions are agreeable, wed like to receive as much base oil as possible from SK, and hopefully SK will kindly utilize our blending plant – if they really feel it necessary to do so – in the Birmingham, Alabama area, Toyono said. In September, sister company Nippon Oil Lubricants began production of engine oils, automatic transmission fluids and shock absorber oils at its new Childersburg, Ala. blending plant on the outskirts of Birmingham.

Collaboration like this allows both SK Corp. and NOC to increase their global competitiveness in todays dynamic oil industry through cost reduction and sharing of resources, said SK Corp.s President and CEO Heon Cheol Shin. The partnership will be carried out on a step-by-step basis in each aspect of our businesses, and great efforts will be made by both parties to achieve jointly identified business objectives.

According to SK, the two companies have also agreed to an equity alliance to further strengthen cooperative relations. If approved, each partner will acquire one percent of the other partys total shares in the market. SK Corp. would acquire 14.3 million Nippon Oil shares while NOC would plan to buy 1.3 million SK Corp. shares. SK expects each purchase to amount to 90 billion Korean won (U.S. $96.1 million).

SK said the companies may also collaborate in possible investment opportunities in refining and petrochemical projects, including joint construction of refining plants overseas. The companies could also cooperate in transportation and storage of petrochemical products.

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