In 2014, the oil industry hit rock bottom as oil prices crashed and the global economy was in doldrums, straining the demand for petroleum products across the board. With oil prices cheaper than water in some places, “the more oil we sell, the more money we lose,” the saying went back then.
SK Innovation, the strongest of Korea’s oil refiners, logged 231.3 billion won in losses that year for the first time in 37 years. GS Caltex and S-Oil fared even worse, with their losses amounting to 456.3 billion won and 289.7 billion won, respectively.
The latecomer, Hyundai Oil, was in a different boat with its operating profit amounting to 226.2 billion won, becoming the only oil refinery to log a profit among the four oil refineries in Korea.
In the second quarter of this year, the four oil refineries posted 978 billion won in operating profit in total, down 65.7 percent YoY, or 1.871 trillion won. The companies took a hit from the global oil price, which fell from $52.5 per barrel in April to $45.8 per barrel in June, down 12.7 percent in the period.
It generally takes a month to complete imports of crude oil as tankers have to ship oil to Korea, and if the oil product prices fall, oil refineries have to sell it at the prices lower than what they for the crude.
SK Innovation posted an operating profit in the second quarter, 12.5 billion won, in the oil refining sector coming in at only to one/70th of what it posted a year ago. GS Caltex had to bear a 94.1 percent fall in its operating profit in the second quarter, posting only 33.6 billion won in operating profit, while S-Oil sustained a loss of 84.9 billion won in Q2. But Hyundai Oilbank showed its durability in the oil industry in Korea with an operating profit amounting to 229.5 billion won in Q2, although it’s down 28.9 percent from the same period a year ago. Its operating profit came to 130.4 billion won in the oil refining sector, down 54.6 percent YoY, showing that it remained strong against the fall in crude oil prices in the global oil market. Its operating profit ranked second in the oil industry, ahead of GS Caltex.
One factor going for Hyundai Oilbank was the higher oil refining margin, standing at 39.1 percent, against 20 percent for other oil refiners. Helping the refining ratio has been its heavy oil cracking facilities, which refine bunker C oil with heavy sulfur content to produce light oils like gasoline, diesel and kerosene. Heavy oil with high sulfur content is much cheaper than crude oil as it is produced from crude oil and goes through the cracking process to produce light oils.
Hyundai Chemical, jointly set up by Hyundai Oilbank and Lotte Chemical in 2014, also played a big role in Hyundai Oilbank’s excellent performance this year. The new chemical company started to turn out petrochemical products from heavy oil, including xylene, from last November.
Dedicated to the improved quality and stabilized supply of petroleum products, Hyundai Oilbank has increased its refinery capacity to 390,000 barrels a day: The No. 2 Refining Plant, which was expanded in May 1996, processes 280,000 barrels a day, while the No. 1 Crude Distillation Unit has a capacity of 110,000 barrels a day.
In 2005, the company also completed the installation of Gas Oil Hydrotreating Unit for ULSD with a capacity of 60,000 barrels a day as part of its effort to address the liberalization of oil prices and the emergence of the open market with enhanced quality competitiveness, making products that meet the environmental standard of the level of advanced countries.In that same year, Hyundai Oilbank completed the construction of a Mogas Hydrotreating Unit with a capacity of 20,000 barrels a day, thereby contributing to the stable production and supply of high-quality low sulfur products for the domestic market.
In addition, the company strengthened its environmental management policy by acquiring technologies equal to the world’s highest standards, including an ultra-modern naphtha reforming process capable of continuously regenerating catalysts, and by launching the full-scale production of products that meet the environmental standards set by developed countries.