S-Oil is setting up a large-scale petrochemical material R&D center in the Magok Industrial Complex in Seoul. The research institute is expected to be the linchpin of its industrial material business, one of the company’s new growth drivers. Under the circumstances, industry experts are paying much attention to what business opportunity it will find at this time, after expanding its paraxylene production facilities.
S-Oil CEO Nasser Al-Mahasher signed a contract with Seoul City Mayor Park Won-soon on February 13 to establish a 29,099 m2-wide technical service and development center in the industrial complex. The construction is scheduled to start within two years. The company bought the land at a cost of approximately 100 billion won (US$94.3 million).
The purpose of the establishment is to enhance R&D capabilities in the oil refining and petrochemical industries. In addition, the institute is going to work on high-value-added technologies using basic petrochemical materials. “We will turn ourselves into a comprehensive and the most profitable energy company covering the oil refining, lubricant manufacturing, and petrochemical sectors,” said the CEO during his New Year’s address earlier this year, adding, “By doing so, we will make inroads into the downstream industry, producing materials used in the IT, BT and other high value added sectors.”
It is in the same vein that CEO Khalid A. Al-Falih of Saudi Aramco, the largest shareholder of S-Oil, met with President Park Geun-hye in January in Davos, Switzerland, where he promised to make a US$5 billion investment in Korea in the near future. A large part of the new investment is expected to be made in the research center and the materials business, mainly for the development of high value added electronic materials and lightweight materials for vehicles.
Such efforts are to find new growth drivers with the oil refining margin dropping, along with the profitability of paraxylene, which is used in the production of synthetic fibers, PET bottles, etc. The company’s business profit rate has declined significantly since the second half of last year.
S-Oil has declined to make a specific comment about the new facilities though. In the past, it invested one trillion won (US$943 million) to complete refinery upgrading facilities in 1997, 10 years ahead of the other companies in the industry. More recently, it made a 1.3 trillion won (US$1.2 billion) investment to expand its paraxylene production plant in 2008 and completed it three years later to enjoy the highest profits among Korean petroleum refining companies.