Reaching Nearly Record Highs
It was confirmed that four major Korean oil refiners posted over a combined 2.8 trillion won (US$2.43 billion) in operating income in the second half of this year. The figure is close to the quarterly record set in the first quarter of 2011.
According to the oil refinery industry, GS Caltex is said to have inked over 760 billion won (US$660 million) in operating profit in the second quarter of this year. If the figure is added to SK Innovation’s operating income (1.119 trillion won or US$1.03 billion), that of S-Oil (642.9 billion won or US$559.0 million) and that of Hyundai Oil Bank (323.4 billion won or US$281.2 million), the total operating income of the four oil refiners will stand at least 2.845 billion won (US$2.47 billion).
2,845.8 billion won (US$2.47 billion) is just tens of billions of won apart from 2.879 trillion won (US$2.50 billion) in the first quarter of 2011 when they enjoyed the best-ever boom in the market. Furthermore, the 2011 and 2016 figures have different features according to those in the oil refinery industry. “In 2011, international oil prices continued to stay at US$100 a barrel, the oil refiners posted much higher sales than now when international oil prices hovered around US$50,” said a representative of a big oil refinery company. “This is attributable to the fact that Korean refinery firms boosted their profitability that much”
In fact, SK Innovation chalked up 17.841 trillion won (US$15.51 billion) in sales and 1.193 trillion won (US$1.03 billion) in operating income in the first quarter of 2011. But in the second quarter of this year, the company posted 10.280 trillion won (US$8.93 billion) in sales and 1.119 trillion won (US$973.04 million) in operating income. Oil refiners’ high operating income this year is caused by high refinery margins which come out when oil import prices are subtracted from product prices. In addition, industry watchers say that oil refiners employed a strategy to expand pre-emptive investment in the non-oil refinery sector and advanced oil refinery facilities and the strategy paid off.
SK Innovation elevated its PX production capacity to 2.6 million tons which ranks sixth by doing away with old refining facilities and expanding facilities which produce high-value-added products such as paraxylene (PX) until 2014. This year, it is projected that the company may post over one trillion won in operating income in the chemical product business only. Hyundai Oil Bank accomplished the highest advancement ratio of 39.1%) among Korean oil refiners by having focused on the expansion of advanced facilities since 2011. An analysis says that advanced facilities empowered Hyundai Oil Bank to continue to go into black although the remaining three failed to in 2014.
But many experts claim that it is unclear whether or not this high-income structure will maintain in the future due to a characteristics of the oil refinery industry that market conditions have a huge impact on oil refiners’ business performances.