Aramco to invest 7 trillion won more in S-Oil facility

President Moon Jae-in, sixth from right, and Saudi Arabia’s Crown Prince Mohammed Bin Salman, seventh from left, pose at a ceremony celebrating the completion of S-Oil’s petrochemical complex in Ulsan on Wednesday at the Shilla Hotel, central Seoul. [YONHAP]

Aramco committed an additional 7 trillion won ($6 billion) in investment to build a second S-Oil petrochemical facility in Ulsan, adding to the 5 trillion won complex that was officially completed on Wednesday.

The expansion adds to the existing Residue Upgrading Complex (RUC) and Olefin Downstream Complex (ODC) in Ulsan. The 5-trillion-won complex was the largest single investment ever made in Korea’s oil and petrochemical industry and Aramco’s first round of funding when it became S-Oil’s largest stakeholder in 2015 with a 63.4-percent stake. The Ulsan complex’s construction started that same year.

“Today’s celebration event is a historical moment for S-Oil. For Aramco as well, the complexes are meaningful as they are the result of a $4-billion investment,” said Saudi Aramco President and CEO Amin H. Nasser during a speech at ceremony held in the Shilla Hotel in central Seoul.

He added that S-Oil was a “great model of investment and partnership,” mentioning how the company had grown 31 times by revenue between 1990 and 2018. Aramco made its first investment in the local company in 1991.

The RUC facility can produce gasoline and propylene from oil residue, a byproduct from the refining process. The ODC processes the propylene from the RUC to make polypropylene - often used for medical products like disposable syringes and drug bottles - and propylene oxide, used in vehicles, construction materials and furniture.

Annually, the complex can produce 405,000 tons of polypropylene and 300,000 tons of propylene oxide from cheap, low-value oil refinery residue. According to S-Oil, both materials are in high demand as they are used for parts in vehicles and home appliances.

In terms of Aramco’s business portfolio, both complexes are part of its ongoing “downstream” strategy, which is to refine crude oil and produce petrochemical products. Most of Aramco’s profits historically came from “upstream” production, which refers to digging and producing crude oil. In the last few years the company has been actively developing its downstream business, in line with a national initiative to drop economic dependence on the country’s oil deposits.

The local complex will expand the petrochemical business for S-Oil as well, which started out as an oil refiner 43 years ago and is now Korea’s third largest refiner.

The 7 trillion won Aramco signed a memorandum of understanding (MOU) for on Tuesday will fund the building of a complex next to the RUC and ODC in Ulsan.

Set for completion in 2024, it will compose of steam cracker and olefin downstream units. The steam cracker unit will produce 1.5 million tons of ethylene per year and other petrochemical materials from naphtha and gas byproducts of the oil refining process, while the olefin downstream unit will produce high-value petrochemical products like polyethylene and polypropylene.

Aramco’s top executives accompanied Saudi Arabian Crown Price Mohammed Bin Salman’s visit to Korea this week. During the stay, business deals were signed with 12 other partners.

Aramco signed an MOU with Hyundai Heavy Industries to establish a joint venture to manufacture engines and offer aftersales services in Saudi Arabia. Aramco will take a 55-percent share of the venture, while Hyundai will own 30 percent and the rest will be owned by the Saudi Arabian Industrial Investments Company.

Aramco also signed an MOU with the Korea National Oil Corporation to explore the potential of building crude oil storage in Korea. With Hyosung, it agreed to build a carbon fiber manufacturing facility in Saudi Arabia.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]