Recognized Even by Proud Europe, 'Basic Design-Linked EPC Contract Strategy' Worked

[K-Construction, New Challenge] Hyundai Engineering
Wins EPC Contract for 4 Trillion KRW PKN Olefin Expansion Project
Largest Ever Contract by a Korean Construction Company in EU Member States
Success of Polymer Polyche PDH/PP Project as Foundation

Europe, proud of its plant industry technology, has recognized Hyundai Engineering, a domestic 'plant powerhouse.' Hyundai Engineering has been entrusted with consecutive multi-trillion-won large-scale petrochemical plant projects that require strong technological capabilities and project execution skills. In particular, Hyundai Engineering is solidifying its position in the European market by continuously renewing the record for the largest project orders won by a domestic construction company in European Union (EU) member countries.

Winning Orders in Competition with Advanced Engineering Firms from Europe and the United States

Site view of the Poland PKN Olefin Expansion Project.
[Photo by Hyundai Engineering]

About 120 km northwest of Warsaw, the capital of Poland, in the central Mazovia province, in the Plock area, construction is underway for a facility producing 740,000 tons of ethylene annually. Ethylene is derived by cracking naphtha, which is refined from crude oil, and is used as a raw material for various petrochemical products such as plastics, vinyl, and synthetic rubber, earning it the nickname 'the rice of the petrochemical industry.'

The company carrying out this construction is the domestic construction firm Hyundai Engineering. In June 2021, Hyundai Engineering won the design, procurement, and construction (EPC) contract for the 'PKN Olefin Expansion Project' ordered by PKN Orlen, Poland's largest state-owned oil refining company, thus participating in the project.

This is the largest project ever won by a domestic construction company in an EU member country, with a contract value of approximately 2.9 billion euros (about 4.1 trillion KRW). This project is regarded as the fruit of Hyundai Engineering's ongoing 'basic design-linked EPC order strategy.' It is significant that Hyundai Engineering succeeded in winning the order by surpassing advanced engineering firms from Europe and the United States, which had traditionally dominated the basic design (FEED - Front-End Engineering Design) market.

In 2020, Hyundai Engineering formed a consortium with the Spanish company T?cnicas Reunidas and was selected as the final contractor for the dual FEED (Dual FEED) by proposing their respective FEED methods during the competitive bidding process. Subsequently, in the EPC main contract bidding, Hyundai Engineering was recognized by the client for its basic design and project execution capabilities, surpassing competing consortium companies to successfully win the dual FEED & EPC project.

The dual FEED & EPC bidding is a project method that selects the most suitable operator (licensor) and requires experience in basic design, project execution capabilities, and advanced design skills. Hyundai Engineering's strengths were highlighted by its accumulated FEED technology and diverse project execution experience based on a long-standing cooperative relationship with the U.S. licensor KBR.

Although the project execution process involved significant difficulties, Hyundai Engineering overcame the crisis well. About eight months after winning the PKN Olefin Expansion Project, the Russia-Ukraine war broke out, adding another layer of uncertainty to a project already challenged by COVID-19. Especially since Poland is the closest country to Ukraine, direct impacts were inevitable. Some participating companies even expressed intentions to withdraw.

In response, Hyundai Engineering formed a task force (TF) team to address various issues such as rising oil prices, raw material costs, labor costs, budget overruns due to supply chain disruptions, and construction delays, and engaged in negotiations with the client for one and a half years. As a result, in July, they succeeded in securing additional project funds and construction period extensions for the PKN Olefin Expansion Project.

First Entry into the European Petrochemical Plant Market in 2019

Photo of the installation of the heaviest item, the 'C3 Splitter'. [Photo by Hyundai Engineering]

Hyundai Engineering's EPC (design, procurement, and construction) contract for the PKN Olefin Expansion Project was built on the foundation of winning the 'Polimery Police PDH/PP Project,' Poland's largest petrochemical plant at the time, in 2019.

The Polimery Police PDH/PP Project was ordered by Azoty Group, Poland's largest private petrochemical company, to build a plant producing 400,000 tons of polypropylene products annually.

Until then, domestic construction companies had mainly secured orders in the European construction market for civil engineering fields such as bridges and tunnels, as well as factories or office buildings for automobile, secondary battery materials, tire, and electronics companies. The Polimery Police PDH/PP Project marked an expansion of business scope by achieving the first large-scale petrochemical plant order in Europe, where advanced plant companies are abundant.

Moreover, Hyundai Engineering's winning of the Polimery Police PDH/PP Project is recognized as a major turning point for Korea's plant industry. The Korea Infrastructure & Urban Development Corporation (KIND) selected this project as its first investment project after its launch in 2018 and supported the entry of domestic construction companies. As a result, Hyundai Engineering's success in securing the final order based on its plant design and construction technology became a representative case demonstrating the capabilities of 'Overseas Construction Team Korea.'

Industry experts view the PKN Olefin Expansion Project and the Polimery Police PDH/PP Project as milestones that have elevated the evaluation of Korean construction and engineering companies' technological capabilities and execution skills to a higher level. It is expected that entry into the previously high-barrier European market will expand further.

Meanwhile, despite facing many difficulties due to the COVID-19 pandemic and the Russia-Ukraine war, the Polimery Police PDH/PP Project is nearing completion, having commenced initial production in early June through close partnership between the Polish government, major clients, and Hyundai Engineering.

This content was produced with the assistance of AI translation services.