S-Oil breaks ground on $7 billion Korean petrochemical project
Published: 09 Mar. 2023, 16:55
Updated: 09 Mar. 2023, 18:51
From left: Mohammed Y. Al Qahtani, executive vice president of Aramco; Ulsan Mayor Kim Doo-kyum; Hussain A. Al-Qahtani, S-Oil CEO; President Yoon Suk Yeol; Amin H. Nasser, Aramco CEO; Sohn Gyeong-ik, head of S-Oil’s labor union; and Lee Jae-hoon, chairman of S-Oil’s board of directors during the ground breaking ceremony held in Ulsan, Thursday
S-Oil broke ground on a 9-trillion-won ($7 billion) petrochemicals project in Ulsan, Thursday, with President Yoon Suk Yeol and Aramco CEO Amin H. Nasser in attendance.
The “Shaheen” project, meaning falcon in Arabic, involves the building of a 3.2-million-ton petrochemicals production facility in the southeastern city by 2027.
S-Oil is investing 9.26 trillion won in the project. Saudi Arabia’s state-run Aramco owns 63.4 percent of the company.
It is the biggest investment for a single project in Korea’s oil and petrochemicals industry ever.
S-Oil completed an oil refinery and petrochemical production facility in Ulsan in 2018 as the preceding investment for the Shaheen project.
Combined with the 4.8 trillion won poured into the first-phase project, S-Oil is spending 14 trillion won in total.
“When Crown Prince Mohammed bin Salman visited Korea in November last year, Korea and Saudi Arabia agreed to foster the relationship between the two countries into a strategic partnership,” said Yoon during the ground breaking ceremony.
“The Shaheen project will significantly contribute to creating new jobs in the region and vitalizing the local economy, and also strengthen ties between Korea and Saudi Arabia,” said Yoon.
During Mohammed bin Salman’s stay in Seoul, the two countries signed business agreements estimated to be worth $29 billion in total.
S-Oil’s contract with three Korean construction companies, including Hyundai E&C for the Shaheen project, was included.
“Direct foreign investments in Korean companies broke the $30-billion mark for the first time ever last year,” said the president, who promised to “boldly reform regulations that do not align with the global standards.”
At the production site will be the world’s largest steam cracking facility, with annual ethylene production capacity of 1.8 million tons, as well as a thermal crude-to-chemicals facility, which converts crude to naphtha. Naphtha is used as feedstock for petrochemical products.
When completed, the Ulsan plant will push up petrochemicals contribution to S-Oil’s revenue from the current 12 percent to 25 percent.
With the Shaheen project, S-Oil aims to diversify its business portfolio into petrochemicals from the traditional oil refining.
Profitability of the oil refining business is heavily dependent on global crude prices. In order to cut exposure to the crude price fluctuation risks, local oil refiners have been ramping up investments in petrochemicals production expansion.
GS Caltex completed a 2.7-billion petrochemical plant in Yeosu, South Jeolla, in November last year, the company’s biggest investment project ever.
SK Innovation is building a chemical recycling facility at its Ulsan refining complex to produce recycled plastics, and Hyundai Oilbank poured 3 trillion won into building a petrochemical plant in Seosan, South Chungcheong, through a joint venture with Lotte Chemical.
On Thursday, Yoon held a meeting with business leaders in Ulsan along with Lee Chang-yang, minister of Trade, Industry and Energy, and visited Hyundai Motor’s port in the coastal city.
BY SHIN HA-NEE [shin.hanee@joongang.co.kr]
with the Korea JoongAng Daily
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