[FETV=김창수 기자] S-Oil has begun to reap the effects of the state-of-the-art oil refinery petrochemical facilities secured through large-scale investments. S-Oil succeeded in turning into a surplus compared to the third quarter with 4Q sales of 4,283 billion won and operating profit of 93.1 billion won. It is the only Korean oil refinery to record 4Q operating profit in the black. By business division, the oil refining business lost 87.9 billion won due to the decrease in petroleum consumption due to the corona, but led to a rebound through the advancement of the petrochemical (72.7 billion won) and lube base oil (110.1 billion won) businesses.
An official from S-Oil said, “Amid the decline in demand for petroleum products worldwide due to the spread of Corona 19 and a decline in refining margins, propylene oxide (a raw material for polyurethane that 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) was effective.”
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 $1098 per ton, since December 2014. It has risen to the highest level. 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 with 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. This propylene is put into the olefin downstream facility (ODC) to make polypropylene (PP) and propylene oxide (PO) and supply it to domestic and overseas petrochemical companies.
Both RUC and ODC facilities successfully completed regular maintenance work for two months in the third quarter, and in 4 minutes they were able to operate 100% of the crude oil refining facilities by’full operation’ of the 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 the consumption of fuel oil such as gasoline, diesel, and jet fuel has dropped sharply as global movement restrictions continue, S-Oil produced valuable results by slightly increasing exports (0.3%) from the previous year. In addition, S-OIL’s unique strengths were also significant, such as responding flexibly to market conditions through collaboration with Aramco Trading Singapore, a major shareholder in Saudi Arabia.
S-Oil’s earnings improvement is expected to take off in earnest 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 robust demand recovery in the automobile, home appliance, and packaging sectors due to consumption promotion policies of countries including China.
An official from S-Oil said, “With the increasing number of incompetent facility closures around the world, the impact of increased supply due to facility expansion is limited, and refining margins are expected to gradually improve as demand for petroleum products recovers due to the spread of inoculation of the Corona 19 vaccine. It is expected.” “In particular, in Asia, demand is expected to recover faster. Accordingly, the company’s business performance is expected to improve rapidly.”