SAFETY ENVIRONMEMT MANAGEMENT And IMPROVEMENT of PETROCHEMICAL PLANTS

SAFETY / ENVIRONMEMT MANAGEMENT And IMPROVEMENT of PETROCHEMICAL PLANTS 2005. 10. 14

Contents 1. Introduction of Company 2. Introduction of SK safety and environment system 3. Improvement of SK petrochemical plant

Introduction of Company

Introduction of SK Corporation ▶ Established: October 13, 1962 ▶ No. of Employees : 4, 931(October, 2004) ▶ Organization : Headquarter, Seoul / Ulsan CLX /Daeduck research center /11 Logistics Centers ▶ Sales : 13. 22 Trillion KRW in 2003 World Top 10 Refinery (Fortune, 2003)

History of SK Corporation 62~70 Years 80~90 Years 2000 Years Built foundation to become General Energy & Chemical Company Globalized Innovative Marketing Company § 1962 Korea Oil Corp. established § 1980 Private Business (SK Group) § 1964 No. 1 atmospheric distillation unit start up § 1985 New aromatic complex start up § 2000 OK Cashbag. com Opened. Sales of Anti-epileptic Technology § 1968 No. 2 atmospheric distillation unit start up § 1989 New Ethylene Plant start up Founded as first oil refining company in Korea, played a key role in the economic development of Korea § 1970 Aromatic plant start up § 1972 No. 3 atmospheric distillation unit start up § 1973 Naphtha cracking center start up § 1990 No. 1 Plastic Plant start up § 1991 No. 4 atmospheric distillation & Oil Chemical unit start up § 1996 No. 5 atmospheric distillation, No. 2 middle distillation unit start up § 2001 Knowledge Management Great Prize Award § 2002 No. 1 Grade in the world for 3 years in Plastic Plant Process safety Index § 2003 China entry of Technology service Business

Introduction of SK Ulsan Complex ▶ Plant Area: 8. 26 Million ㎡ ▶ No. of Employees: 2, 850 ▶ No. of Plant / Unit : 5 Plants / 150 Unit ▶ Storage Tank For Hazardous Materials : 570 Spot ( 328 Ten Thousand ㎘) ▶ Pressurized Gas Storage Tank : 45 Spot (~ 80 Thousand ㎘) ▶ Wastewater Treatment Capability : 4 Waste Water Treatment Plant (~55 Thousand Ton/ Day) ▶ Air/Water Automatic Monitoring System: 30 Spot(Air 20 Spot, Water 6 Spot)

Organization of SK Ulsan Complex Production Division Refinery Plant Utility Plant HOU Plant FCC Plant Petrochemical Plant Polymer Plant Storage & Distribution Production Management / Laboratory Corporate Engineering & Maintenance Div. Technical Supporting Div. Maintenance Production Supporting Div. Inspection Technology Service Biz. Div. Electric & Instrument Project & Engineering & Technical Service Health, Safety and Environment Division

Introduction of SK safety and environment system

Company Vision SK VISION Economical The Highest Valued Company in Korea Mission * Most Successful Value Innovation Company * Continuous Customer Values Creating Company Value Maximization for the Shareholders, investors and employees SK Safety : Zero Accident workplace through advanced HSE Management system Health : Value Creation by the healthful employees at the optimal work environment VISION HSE Mission Environment : Continual environmental Improvement through advanced HSE Management system Social Mission Company Growth in line with society

Mission & Goal Complex Safety / Environment Mission § Internal customer : No Anxiety about accident and disease § External Customer : Recognizing Safe and Eco-Friendly Company Goal § Employee Incident “Zero” § Contractor Incident “Zero” § Employee Anxiety “Zero” § “No 1” Company for Public

SK SHE Management System HISTORY q Compliance Stage: 1962 ~ 1990 1962 Korea Petroleum Corporation founded 1972 Began Operation of a biological treatment facility for the first time in Korea 1990 Received Award of Honor for safe operation from the US National Safety Council q 1991 1993 q Control Stage: 1991 ~ 1995 Began study of environmental impact throughout the Ulsan CLX Declared the Safety Environment Policy Completed all-purpose environment facilities Received ISO 9001 certification for the entire products and process in 7 areas Management Stage: 1995. 12 ~ 1996 Received ISO 14001 certification 2000 Received the Grand Prize for Environmental Management from Maeil Business Newspaper 2001 Received the Best Safety and Health Management Company certification from Mail Business Daily 2002 Established the HSE Management Master Plan • Integrated SHE management system • Advanced SHE Management Initiative

SK Safety· Environment Management Plan Risk Assessment & Management Legal Compliance Adjust Information / Communication ♣ Leadership ♣ Mindset & Behavior Community Relationship Capability Procedures Evaluation / Improvement Performance Management Measure Implement

Environment Improvement Environment Master Plan (2002 ~ 2006) Purpose v To meet new reinforced environment regulation v To achieve comfortable operation environment of CLX Study Procedure Diagnosis for Plant Opinions of Plant Develop ideas Experience New Regulation Extract problems And Generate ideas Improve ment Evaluation Investment Cost for improvement [Unit : Million $, US ] ~ 2003 2004 2005 2006 Total Petrochemical 4. 4 2. 8 4. 6 2. 2 14. 0 Total CLX 12. 2 12. 7 41. 5 28. 9 95. 3

SK Safety· Environment Management v ‘To be’ of SK Corporation Achievement of ‘To be’ through continuous improvement of Safety /Environment Performance with continuous improvement To be As is §The level of HSE Management is high and workers’ perception is consistent § HSE Master plan is already established and executed § The level of plant availability is maintained high through continuous effort on accident prevention § Contractors support HSE Management § Local community perceive favorably Safety / Environment Management System Ø Incident rate “Zero” Plan Adjust Ø Zero human, process and environment accident, and removal of employee anxiety over HSE to promote proactive working condition Ø 100% Plant Availability Ø Establishment of HSE management partnership with contractors Ø Local community perceives CLX as safe and eco-friendly company Implement Measure Ø Contractor Incident rate “Zero” Ø Member anxiety “Zero” Ø Awareness of The public “No. 1”

Improvement of SK petrochemical plant

Improvement of Petrochemical Plant v Change for Operation Concept Unit Severity 2000 ~ World Best Level Very Stable stable • Diagnosis and Improve (TOP) • SK KM System Expansion Period Moderate 1990 ~ 1999 • SAVE Program • T/A Interval Increase - PGC Fouling Prevention - C 4 Acetylene Converter ~ 1990 General Operation Mild High Severity High Stability High Capacity Improved stability Stabilization Period • Quality Control • Periodical T/A (1 ~ 2 yrs) • Trouble Control / Education Moderate Unit Stability High

Activities SAVE (Systematic Approach for Valuable Energy) (1999) Objectives v To save utility cost dramatically through various analysis (about 20 analysis methods) and generate ideas v To achieve dramatic performance improvement in the shortest period Activities * System Analysis * Loss Analysis * Trouble Analysis Steam & Water Improvement Idea Valuable Energy Electric Fuel Energy Saving & stable operation Through Idea Implementation

Activities TOP (Total Operational Performance) (2000) Objectives v To achieve dramatic performance improvement in the shortest period v To build a system for continuous performance improvement Activities QUALITY COST • Raw/Subsidiary Materials Reduction • Energy use Reduction • Productivity Improvement • High Quality Product Increase • Waste Reduction Reliability Improvement Idea • Unscheduled S/D Time Reduction § T/A Interval Prolongation World Best Competitiveness by 2002

Activities for Stable Operation Turn Around Interval Increase Up to early 90’ T/A Interval Prolongation TFT T/A by every two years • B/M of developed plants • Diagnosis of unit • Extract bottleneck point • Solve the problem considering safety and environment Major Problems - Fouling of compressor and coolers - Efficiency degradation of major towers - Equipment failure Future Current (’ 98 ~ ) T/A by every four years Early ’ 90 Minimize the degradation of major equipment. Apply on stream cleaning method

Major Activities for T/A Interval Prolongation PGC Fouling Prevention (1996 ~ ) v Fouling and polymerization at PGC system § § Cyclopentadiene dimers/polymers formed by Diels-Alder reactions Polymers formed by free radical reactions Condensation/deposition of heavy hydrocarbons in the gas Inorganic deposits Carbon powder or cokes carryover from quench towers CARBON- MIXED POLYMERS Compressor Casing Polymer Compressor Interstage Cooler Polymer Months

Major Activities for T/A Interval Prolongation v New Wash Oil by SK v Higher Solvency v Remain as Liquid v No Olefins / No Sulfur v Higher boiling temperature Dissolve all type of deposit formed on the compressor. Apply at PGC After Application * Lower energy consumption * Increased turn-around interval (4. 5 years) v PGC Efficiency Trend After Application Before After ( Efficiency, %) Excellent Performance ( Month)

Major Activities for T/A Interval Prolongation C 4 Acetylene Converter (1998 ~ ) Problems v Short turn-around interval of Butadiene Extraction Unit v Low efficiency of BEU at EOR (End of run) Scheme for new system C 4 Acetylene Converter v B. D Process Debutanizer C 4 Storage Tank Performance v Prolongation turn-around interval (2 years 4 years) v Prolongation of fouling towers cleaning interval v Keep the maximum capacity of BEU Pre-treatment of fouling materials v Lower cleaning frequency of fouling equipment

Activities Knowledge Management System (2000 ~ ) v. Improved Operation Safety Standard Trouble History Improvement History Benchmarking Materials SK KM System Education Materials Operation Data Near Miss, TPM, etc v Operation Data v Experience All activities are achieved and stored and shared at SK’s KM system.

Performance of Olefin Plant Performance for Reliability (based on Olefin Plant) Capacity (MTA C 2 -) 800 Process efficiency Improvement #1 EU (190) #2 EU (650) #2 EU Revamp 700 #2 EU NEP S/U 600 550 500 100 98. 0 97. 2 T/A Interval Prolongation #1 EU Revamp #1 EU NCC S/U 150 100 0 ’ 73 ’ 78 ’ 89 98 96 94. 9 94. 1 92. 9 200 670 (RI) 840 ’ 96 * Annualized T/A period is included in Reliability Index. (RI = Actual production / Max. C 2 Production Capacity x 100) ’ 03 94 92

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