Impact of recovery in demand for automobiles and home appliances on consumption promotion policies in countries including China
Incompetent refining facilities are increasingly closed and demand for petroleum products is expected to recover
[투데이에너지 조대인 기자] S-OIL (CEO Hussein Al Qatani) has begun to reap the effects of the state-of-the-art refinery petrochemical facility secured through large-scale investment.
S-OIL’s fourth quarter sales and operating profit were KRW 4.28 trillion and KRW 93.1 billion, turning profitable compared to the third quarter.
It is the only Korean oil refinery that recorded a surplus in 4Q09.
By business division, the oil refining business lost 87.9 billion won due to a decrease in petroleum consumption caused by the corona, but petrochemicals lost 77.7 billion won) and lube base oil led a rebound with business performance of 110.1 billion won.
An official of S-OIL said, “Amid the decline in global demand for petroleum products and a decline in refining margins due to the spread of Corona 19, propylene oxide (a raw material for polyurethane, which is often used as interior materials for automobiles and home appliances), lubricant base oil, has recently been in the spotlight. The strategy that maximized the production of lucrative products such as low-sulfur marine oil (LSFO), which is being received, was effective,” he said.
In particular, the spread showing the profitability of propylene oxide (PO) in the fourth quarter of last year (PO price minus the raw material propylene price) rose more than 85% from $595 per ton in the previous third quarter to $1,098 per ton, the highest level since December 2014. Climbed to
Profitability of propylene oxide continues to be at an all-time high, and is expected to contribute significantly to future earnings improvement.
Accordingly, S-OIL announced its provisional results on the 28th of last month, “In order to use a good market situation, we are increasing the production of propylene oxide, which has a capacity of 300,000 tons, by about 30,000 to 40,000 tons, and we intend to maintain a high utilization rate in the future. “
S-OIL’s new advanced facility (RUC&ODC), which started operation at the end of 2018, is evaluated as the world’s top in cost competitiveness and operational efficiency.
The resid refinement facility (RUC) produces gasoline, advanced gasoline additives (MTBE), and propylene and ethylene, which are basic raw materials for petrochemicals, using heavy residual oil, which is cheaper than crude oil, and uses this propylene in the olefin downstream facility (ODC). It makes polypropylene (PP) and propylene oxide (PO) and supplies them to domestic and overseas petrochemical companies.
RUC and ODC facilities successfully completed regular maintenance work for two months in the third quarter, and in the fourth quarter of last year, they were able to operate 100% of the crude oil refining facilities by’full operation’ of advanced facilities including RUC.
This is significantly different from the fact that domestic refineries lowered the utilization rate in 4Q to 80%.
As for the product market, overseas networks that have been elaborately built for over 40 years played a big role.
Even in unprecedented adverse conditions, when consumption of fuel oil such as gasoline, diesel, and aviation oil fell sharply as the global movement restrictions continued, S-OIL’s export volume increased slightly (0.3%) from the previous year.
In addition, S-OIL’s strengths were also significant, such as responding flexibly to market conditions through collaboration with Aramco Trading Singapore, a major shareholder, Saudi Aramco’s overseas sales subsidiary.
S-OIL earnings improvement is expected to accelerate this year.
This is because the new advanced facilities have entered the stabilization stage, and major production facilities completed regular maintenance last year, allowing the factory to operate without shutdowns this year.
In addition, olefin items such as propylene oxide and polypropylene, which are S-OIL’s flagship petrochemical products, are showing strong strength this year on the back of a solid demand recovery in the automobile, home appliance, and packaging sectors due to consumption promotion policies in China and other countries.
An official of S-OIL said, “With the increasing number of incompetent facilities closed around the world, the impact of increased supply resulting from facility expansion is limited. “We expect the company’s business performance to improve rapidly as demand is expected to recover faster, especially in Asia,” he said.
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