Minister Sung Yun-mo of the Ministry of Trade, Industry and Energy (MOTIE) presides over a meeting with CEOs of the four refinery companies, including President Cho Kyong-mok of SK Energy, President Huh Se-hong of GS Caltex, President Ryu Yeol of S-Oil, President Kang Dal-ho of Hyundai Oil Bank (Photo: MOTIE)

The global COVID-19 pandemic has wrought havoc to many industries. In particular, the global oil refinery industry, hit hardest by the pandemic, has been further reeling from lower crude oil prices, prompted by major oil producers’ failed attempt to reduce crude oil production and a drop in demand, caused by the pandemic.

The price of U.S. crude oil, which plunged from $18 a barrel to minus $38 on April 24, have things make worse. Korean four refining companies imported crude oil at prices ranging from $20 to $40 and produced gasoline, Bunker C-oil and other petroleum products through refining process, but they have to sell the outputs at losses.

Securities sources predicted that SK Innovation will incur an estimated more than 1 trillion won in losses for the first quarter of the year. GS Caltex, S-Oil and Hyundai Oil Bank are forecast to incur an estimated 500 billion won in operating losses.

Minister Sung Yun-mo of the Ministry of Trade, Industry and Energy (MOTIE) presided over a meeting with CEOs of the four refinery companies at the Korea Trade Insurance Corp. building on April 22 to cope with hardships the oil refiners experience.

President Cho Kyong-mok of SK Energy said the refiner industry and the government would joint forces to overcome a crisis, caused by the pandemic.

Following the meeting, Minister Sung said he was sympathizing with the hardships the refining industry suffered, and his ministry decided to provide support after seriously taking into account the grievances they experience.

Among those on hand at the meeting were Chairman Kim Hyo-seuk of the Korea Petroleum Association, President Huh Se-hong of GS Caltex, President Ryu Yeol of S-Oil, and President Kang Dal-ho of Hyundai Oil Bank.

At the request of the refining industry, the ministry was considering deferring the payments of transportation, energy and environment taxes imposed on the refining companies. If the refiners are allowed to delay payments of the taxes imposed in April for three months, they could secure an estimated 1 trillion won in cash flows.

The government decided to defer a surcharge on the import of petroleum and import tariffs for 90 days and two moths, respectively, to help refining companies cope with a liquidity crisis.

The participants asked for the ministry to come up with steps to overhaul taxes to ramp up the competitiveness of the exporting industry in a long-term perspective, saying that even though a liquidity crisis is an urgent one, only short-term solutions cannot overcome a crisis.

As to the overhauling of taxes, President Cho said the ministry cannot unilaterally make decisions on the matter since it needs to be consulted with tax and budget authorities, and the ministry decided to take the matter as one of its long-term tasks.

As the refining industry had overcome a crisis in 2014, he said, it could tide over if we join forces with support from the government in a wise fashion.

The refining industry will devote itself to making its own efforts to overcome the crisis and play the part as one of the nation’s key industries since it has great spillover-effects to downstream industries, he said.