SK’s Lube Base Oil Production - Successful Completion of 2nd LBO Project Sook-Hyung (Sam) Kwon Vice President & Project Director

Overview of SK Corporation Establishment October 1962 Asset 14.9 Billion US$ (2004) Employees 4950 Persons Sales 17.4 Billion US$ (2004) Business Areas Oil Exploration & Production Petroleum Refining Chemicals Gas, Coal, Lubricants Technology Business New Business ( Online / Offline ) SK Corp’s highly integrated Ulsan Complex is one of the largest single-site refinery in the world, having refining capacity of 840,000 bpsd.

History of SK’s Lube Base Oil Production #1 LBO Plant 1995: Commissioned #1 LBO Plant, Hydroprocessing-based, Conventional MLDW included SK UCO Lube Process Technology 1997: Revamped to ISODEWAXING/Hydrofinishing Unit with ICR 408/407, Better Yield and Quality 2003: Applied New ISODEWAXING Catalyst of ICR 422, Better Yield and Quality

History of SK’s Lube Base Oil Production #2 LBO Plant 2004: Commissioned #2 LBO Plant, Hydroprocessing-based, included SK UCO Lube Technology 2004: Increased Throughput by 20% 2005~6: Planned to Revamp

Application of Two LBO Plants LPG Fuels HCK Naphtha VGO Kerosene Diesel Vac. Distill AR Vac. Distill 70D UCO #1 CDW 100D 150D Yubase 3,4,6,8 Vac. Distill 70D #2 CDW 100D 150D 250D #2 LBO Plant

Overview of 2nd LBO Project Project Period August, 2002~ June, 2004(23 months) Mechanical Completion : May 20, 2004 100% Operation : June 29,2004 Capital Investment US$ 120 Million Vac. Distillation Unit Catalytic Dewaxing Unit Utilities and Offsite & Tankage Fast-Track Schedule Quality and Safety Cost Saving Project Target

2nd LBO Project Fast Track Schedule Involvement of Experienced Process Engineers from Planning to Start-up Speedy Decision Making based on SK’s Accumulated Technology and Experience Early Freezing of Process & Basic Engineering Early Purchasing of Long-Delivery Equipment Utilization of 3D Model Design Optimization of Precom. & Commissioning Activities Dramatic Savings of Document Approval Period

2nd LBO Project Quality and Safety Reflected Experienced Data and Procedure of 1st LBO Project in Design, Procurement, Construction, and Start-up Operation Audited Major Engineering Design Results by 3rd Party Crosschecked Design Quality between CDW Licensor and Basic Engineering Co. Dispatched Resident Experts to Manufacturing Shop of Major Equipment Vendors Strengthened Safety Mind and Behavior through Periodic Safety Committee Double Checked High Pressure Welding Qualities

2nd LBO Project Cost Saving Minimized Spare Parts and Bump Factor by 3D Model Design and SK’s Experience Minimized Trial and Errors from #1 LBO Experience Optimized Design by Removing Unnecessary Items Optimized Precom. & Commissioning Activities Purchased Major Equipment Economically

Start-up Performance Description Planned Actual Throughput, B/D 7,000 Reactor Temperature, Deg. C Isodewaxing Hydrofinishing 350 232 360 Lube Product Yield, % Base +2.0 Product Quality - Viscosity Index Base +1 Any Bottlenecked Items Towers - Heaters and H-exchangers - Rotating Machine - Utilities None

Summary of 2nd LBO Project Description Planned Actual Fast-Track Schedule EPC Schedule, months Commissioning and Start-up, months 26 3 21.7 1.3 Quality and Safety Number of Accidents Consecutive No Accidents Recorded, MH - None 2,950,000 Cost Cost Saving, % of TIC 5 22 Capacity, B/D * 7,000 8,400 Product Yield and Quality Base Better * Feed rate was increased within one month after start-up.

Success through Partnership with CLG Design Review CLG reviewed all important design documents related to the IDW unit. CLG assisted conformity check of equipment and plant. Catalyst Selection SK and CLG did joint testing for catalyst selection . Start-up Assistance CLG supported technical services for start-up.

Future Partnership with CLG SK challenges CLG to improve lube quality/yield further by developing next-generation ISODEWAXING and ISOFINISHING catalysts. SK/CLG’s driving forces to improve lube qualities are now extending to the Hydrocracking catalysts. SK/CLG collaborate on validation of new technology and ideas in Hydroprocessing chain related to lube base oil production.