S-Oil, headed by CEO Nasser Mahasher, won the $20 Billion Export Tower at the 49th Trade Day ceremony held at COEX in Seoul for contributing to Korea’s total exports by that much this year. The oil refinery, which Aramco of Saudi Arabia holds a major stake, first introduced the exports of oil products in Korea, setting up a new paradigm for exports of oil products. Since its operation began in 1980, the oil refinery exported more than 40 percent of its products overseas, showing that oil products refined in Korea can be shipped abroad. The Saudi invested and managed oil refinery’s oil product exports grew to more than 50 percent of its total production in the 2000s and expanded to 66 percent in 2011.

Other oil refineries in Korea joined S-Oil in exporting their oil products in early 1999 to make oil products a key export item from Korea, and in the first half of this year their exports amounted to $27.3 billion, taking over as the top export product for Korea.

In early 1999 S-Oil invested 1 trillion won in its heavy oil cracking facilities and desulfurizing facilities to enhance the exports of its oil products, lifting the oil refinery to a high value-added export industry from just being refiners of oil. From its early stages of operation, the company invested heavily in lubrication oil production facilities, successfully localizing the production of lubrication oil, and from 2002 the oil refinery began to produce and market Group III basic lube oil leading the upgrading of Korea’s lube oil production industry.

 S-Oil is the world’s second largest producer of base lube oil at 39,000 barrels per day and a core supplier of the product. The oil refinery is the largest producer of Group I, II, and III base lube oil in the world. In 2011, the oil refinery completed the construction of the largest production facility for paraxylene in the world by investing 1.3 trillion won, leading to earnings of $2 billion annually from exports of the petrochemical product. The oil refinery has played a key role in upgrading the industrial structure of the petrochemical industry in Korea and its global competitive edge.

In the meantime, S-Oil has concluded an agreement with Aramco of Saudi Arabia on the supply of crude oil between the two companies for 20 years on Feb. 9 at Aramco’s head office in Dharan, Saudi Arabia, the oil company said recently.

Aramco holds a 35 percent stake in S-Oil and has been supplying crude oil to the Korean oil refinery since 1991 when it bought a stake in the oil refiner under a 20-year long-term contract, which expired last year.

Attending the signing ceremony on the Korean side included Minister Hong Suk-woo of the Ministry of Knowledge Economy and Senior Vice President Kim Dong-chul of S-Oil and on the Saudi side were Al Naimi, minister of the Petroleum and Minerals Ministry of Saudi Arabia, and Chairman Khalid Al-Falih of Aramco, among others.

Under the new long-term supply contract, S-Oil is expected to get supplied with crude oil on a stable basis from Aramco. The oil refiner refines 669,000 barrels of oil daily at its refinery in Korea, or 230 million barrels annually, about 30 percent of the total crude oil refined in Korea.

S-Oil officials said a long-term contract was possible due mostly to close ties between Korea and Saudi Arabia and the two oil companies’ amicable relationship over the past two decades, despite the fact that crude oil supply contracts are usually only signed for a year.

Saudi Arabia is the world’s largest oil producing country with crude reserves amounting to 260 billion barrels. It enjoys absolute influence in the global market with production capacity of 12 million barrels of crude a day, which is equivalent to 11 percent of total global crude output.

Saudi Aramco, Saudi Arabia’s state-owned oil company, is the world’s largest oil company overseeing all oil-related business of the country. 

Saudi Aramco has maintained long-term investment relations with S-Oil ever since it decided to invest in the Korean refiner in the form of a joint venture in 1991. The long-term investment by Saudi Aramco serves as the most ideal model of economic cooperation between an oil producing country and a consuming country, as well as the symbol of strong ties between the two countries.