S-Oil sees profit rise as petrochemical business grows
Quarterly revenue was 5.3 trillion won, up 2.8 percent on year, the company announced Tuesday. In terms of operating profit, the company reported its best performance in five years: 629.2 billion won.
S-Oil saw on-year profit growth across all its business segments: Oil refining, petrochemicals and lubricants. This strikes a stark contrast to last year, when oil refiners in the country all struggled due to slow oil refinery demand as the global economy froze during the Covid-19 pandemic.
In this first quarter, S-Oil's oil refining business alone raised 3.8 trillion won in revenue, down 4 percent on year and 342 billion won in operating profit, from 1.2 trillion won in operating losses in the same period last year.
However, the big contributors to profit were lubricants and petrochemicals, which are smaller than oil refining by revenue size. They each accounted for 30 and 45 percent of quarterly operating profit.
The achievement was all the more significant, the company explained, as oil refining operates at a loss — at minus $1.7 per barrel — a factor that unavoidably pulls down profits.
This loss was covered by the improved profit margin spread of petrochemicals.
In 2018, S-Oil completed a residue upgrading complex and olefin downstream complex in Ulsan with investments from Aramco, Saudi Arabia's state-run oil company and the Korean company's major shareholder. Both are "downstream" facilities that can produce gasoline, propylene and other chemicals out of residue naturally produced in the oil refining process.
The facilities launched operation in 2018 but it wasn't until last year that they started running at full capacity, without technical failures, after a large-scale repair that took place between July and September.
The fact that these two operations reached a state of stable operation is significant for the company as they are at the core of its strategy to expand revenue share of petrochemicals, instead of oil refining.
S-Oil anticipated a favorable market this year, saying demand for petrochemicals and lubricants are likely to stay strong in the near future.
"We're seeing a lot of oil factories shut down globally so even if we expand production, the impact won't be big [enough to greatly affect prices]," the company said in a statement. "With inoculations going on, the oil refining margin is also expected to gradually increase, especially in Asia where the increase is expected to happen faster than elsewhere."
BY SONG KYOUNG-SON [email@example.com]