President Kang Dal-ho and other Hyundai Oilbank executives work as one-time crew on Aug. 1 at a gas filling station in Gangnam-gu, Seoul, one of the stations Hyundai Oil bank acquired from SK Networks. (Photo: Hyundai Oilbank)

Despite sagging demand in petroleum products caused by the spread of COVID-19, Hyundai Oilbank successfully turned an operating profit in the second quarter of the year.

Hyundai Oilbank has proved to be a refinery which has a capability to endure the crisis, experts say.

Hyundai Oilbank said on July 30 that it logged 2.551.7 trillion won in sales and 13.2 billion won in operating profit in the second quarter on a consolidated basis.

S-Oil and SK Innovation suffered massive operating losses during the same period. GS Caltex, announcing Q2 business performances in August, is predicted to post a loss.

The market consensus was that Hyundai Oilbank was expected to log more than 70 billion in operating losses.

Due to sagging demand in petroleum products, crack spread, a measure of the refinery’s profitability, stood at minus $1.4 per barrel in the 2nd quarter. It was the first time that crack spread fell to a minus territory since 1997.

The reason for Hyundai Oilbank turning an operating profit despite the stark market situation is that the refinery had gotten nimble in coping with market trends to minimize losses.

The figure is one-23rd compared to SK Innovation’s 432.9 billion won and one-nineteenth compared to S-Oil’s 358.7 billion won.

Under the stewardship of President Kang Dal-ho, Hyundai Oilbank, sensing the arrival of a crisis with agility, declared an emergency management crisis. President Kang’s fast decision-making shone.

President Kang presided over profit improvement sessions weekly instead of the conventional monthly ones to take stock of crude oil prices, petroleum prices, and currency movements and change production and sales plans.

For instance, if crude oil from Middle Eastern countries were expected to rise, Hyundai Oilbank chose to introduce a cheaper heavy crude oil from South America instead of crude oil from the Middle East.

As air fuel demand dropped due to a sagging demand in flights, caused by the spread of the COVID-19 pandemic, Hyundai Oilbank increased diesel production instead of air fuel production.

That was President Kang’s idea, based on a prediction that as diesel is used for not only transportation but also industry and power generation, demand for the fuel does not much decline yet it carries higher margin.

Hyundai Oilbank saw the yield rate of diesel production standing at 47 percent, 8 percentage points higher on the average compared to its rivals.

Hyundai Oilbank’s massive investment to build heavy oil upgrading facilities has also played a part. In 1989, Hyundai Oil became the first Korean refinery company to introduce a heavy oil upgrading facility. The refinery company has been invested for heavy oil upgrading since then.

Hyundai Oilbank saw its heavy oil upgrading facility rate standing at 40.6 percent, 20 percent to 30 percent higher than its competitors.

The secret behind Hyundai Oilbank’s opting to introduce super heavy crude oil from South America instead of Middle Eastern crude oil is the refinery company’s higher heavy oil upgrading capability.

In a related development, Hyundai Heavy Industries Holdings saw its Q2 business performance improve compared to the previous quarter on the back of major subsidiaries’ good business outcomes.

The holding company of Hyundai Heavy Industries Group reported 4.005.8 trillion own in sales, 104.3 trillion won in operating profit and 22.2 billion won in net profit in the second quarter of the year on a consolidated basis.