CEO Othman A-Ghamdi of S-Oil.

S-Oil achieved record-breaking operating profit last year, with its non-oil refining businesses, including petrochemical and lubricant base oil, exceeding 50 percent of the overall operating profit.

S-Oil announced on Feb. 2 that it posted sales of 16.32 trillion won, operating profit of 1.69 trillion won, and net profits of 1.26 trillion won for the full year of 2016.

Its 2016 operating profit was the highest in its history, exceeding the previous record of 1.63 trillion won set in 2011. 

Sales fell 8.8 percent year on year primarily due to the impact of low oil prices, but operating and net profit each jumped by 107.1 percent and 99.9 percent year on year.

Its operating profit-to-sales ratio stood at 10.4 percent last year, the highest since 2004 (11.5 percent). S-Oil attributed the strong results to the increase in the share of high value-added products such as paraxylene and high-quality base oil, plus the improvement in production efficiency and profitability resulting from initiatives to renovate facilities in the Ulsan plant.

As planned, S-Oil will triple its investment this year to 3.19 trillion won to upgrade facilities and its petrochemical complex project. 

The company will invest 5 trillion won in total through 2018 for the construction of a petroleum residue decomposition facility. 

The construction has been advanced about 1/3 as of the end of last year, the company said. 

During an investor relations (IR) conference call, S-Oil also forecast its business would continue to fare well in 2017. Its refining business is expected to further expand its presence in China and South East Asia on solid demand. The company also projected refining margin would remain high as facilities with a capacity of 800,000 barrels in Japan are scheduled to be shut down this year. S-Oil, South Korea’s third-largest oil refiner, said Thursday it swung to profit in the fourth quarter of 2015 thanks to high refining margins prompted by heightened demand for oil products.

The firm posted an operating profit of 17 billion won ($14 million) in the October-December period last year, up by 5.6 percent from the previous quarter, and swung to a profit from an operating loss of 240 billion won for the fourth quarter of 2014. “The operating income saw a small increase from the third quarter,” said S-Oil during a conference call. “Refining margins were very strong, but the decline in crude prices canceled out much of the higher income.”

Though plunging oil prices led S-Oil to record inventory valuation losses of some 250 billion won, the refiner said it remained profitable in the fourth quarter thanks to an improvement in the Singapore refining margin ($3.90 per barrel in Q3 to $6.40 per barrel in Q4).

“In the fourth quarter, refining margins surged along with increase in spreads of all petroleum products on the back of strong demand in Asia amid further declines in crude prices,” S-Oil said.

Hit by low crude prices, its refining business logged an operating loss of 137.9 billion won. Yet, its petrochemicals and lube oil business together recorded 155 billion won in operating profit, according to S-Oil.

S-Oil’s fourth quarter sales stood at 3.95 trillion won, while net profit stood at 80.6 billion won, a significant improvement from a net loss of 272 billion won during the same period in 2014.

Projecting a positive outlook for 2017, S-Oil said “refining margins will remain healthy on the back of tight supply-demand balance as the global oil demand growth will continuously outpace the incremental supply. Asia refiners will benefit the most.”

A view of the S-Oil refinery complex in Ulsan at night.(Photos: S-Oil)