The oil industry became one of the few big industries that ended 2015 with a big smile with operating profit skyrocketing to 4.8 trillion won, the second-highest figure in its history, while many other industries struggled due to the economic slump at home and overseas.
The oil refiners oil products exports to the U.S. and the Middle East rose sharply despite the cuts in crude oil prices and Hyundai Oilbank, the smallest of the four, saw its operating profit rising to 629.3 billion won, the largest in its history, generating operating profit for 14 consecutive quarters.
According to a local economic daily, Hyundai Oilbank’s total sales last year were the second best after 7.207 trillion won in 2011, which was a “quantum jump” considering that the refiner ended the preceding year in the red. This year, they project 5.4 trillion won in sales, up 14 percent from the preceding year, counting on a large increase in exports of petrochemical products.
According to the Korea Petroleum Association, the four oil refiners, including SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank, exported 45 percent of 950 million barrels of oil and oil products through the expansion of their export markets around the world, not limited to China and Japan, which are the traditional importers of Korean oil products. The oil products were shipped to such places as the U.S., Europe, Saudi Arabia, the United Arab Emirates, among others, some major producers of crude oil, totaling some 66 nations in 2015 up from 55 in 2014.
Hyundai Oilbank benefitted from the higher refining margin, which stood at 4.8 percent, much higher than 1.1 percent on average for its rival oil refiners last year. Oil industry sources speculated that Hyundai Oilbank took advantage of its smaller scale of operation to cut costs and other factors compared to its much bigger rivals. The bigger oil refiners struggled with their high crude oil inventories when the crude oil prices fell. But Hyundai Oilbank slowed its operation down to cope with the steep fall in oil prices.
Hyundai Oilbank was able to upgrade its refining facilities by 39.1 percent, around 10 percent higher than the average rate for its rival oil refiners, which came to 26.9 percent. Officials of the oil industry association said they achieved economies of scale with such a large refining capacity. Now they are enjoying the fruits of their labor.
The four oil refiners currently have the capacity to refine 2.9 million barrels of oil per day, up around 11 percent from 2006. Last year, the operating profit rate jumped from around 2 to 4.8 percent, they said. Now the problem is whether the situation could continue or not: Will China increase its oil output and will oil prices continue to stay low.
An oil refinery official said the refining margin has been high enough to give the oil refineries a better profit, but the problem would be whether the oil prices continue to stay low. If they fall to below $30 per barrel, the loss will grow bigger for the refiners.
The oil company employs cutting-edge facilities, including an ultra-low sulfur diesel and clean fuel plant, in line with the principle of ensuring environmental protection by minimizing pollutant emissions. This will also secure the necessary product quality competitiveness following the opening of the petroleum market, moreover, various environmental protection activities such as the 3R (Reduce, Reuse, Recycle) Campaign, the fry stock project, the installation of under-ground water monitoring systems. and numerous voluntary agreements are taking place at the production sites.
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Hyundai Oilbank’d refinery plant in Daesan, Chungcheongnam-do. (Photos:Hyundai Oilbank)
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