Korea’s S-Oil targets $2bn capex for Ulsan oil-to-chems project in ’24

Pearl Bantillo

29-Feb-2024

SINGAPORE (ICIS)–South Korean refiner S-Oil has earmarked won (W) 2.72tr ($2bn) this year for its thermal crude-to-chemical (TC2C) project called Shaheen, representing 87% of the total capital expenditure (capex) set for 2024.

The full-year capex at W3.14tr was up 54% from 2023, the company said in its Q4 results presentation released in early February.

Construction of Shaheen at the Onsan Industrial Complex of Ulsan City started in March 2023 and will be in full swing this year, with mechanical completion targeted by the first half of 2026.

The funds that will go to the project – whose name was derived from the Arabic word for falcon – were up 86% from 2023 levels.

As of end-December 2023, site preparation was 48% complete, with engineering, procurement and construction at 18.7%, according to S-Oil.

“Site preparation and EPC [engineering, procurement and construction] work is under full-fledged execution with the actual progress going smoothly according to the plan,” the company said.

The project will leverage on the T2C2 technology of its parent company Saudi Aramco, the world’s biggest crude exporter. Aramco owns more than 63% of S-Oil.

The project is expected to yield 70% more chemicals, with a capex/operating expenditure savings pegged at 30-40% versus conventional process.

Meanwhile, for upgrade and maintenance of plants in 2024, total expenses will fall by about 32% to W298bn, with just two plants due for turnaround in the year – its No 1 crude distillation unit (CDU) and its No 1 lube HDT (hydrotreatment) unit, the company said in the presentation, noting that the plan is preliminary.

ICIS had reported that S-Oil will conduct maintenance at its Group I and Group II base oils units in Onsan, Ulsan for more than a month from mid-September this year.

On 23 February 2024, a fire broke out at the company’s Onsan production site in Ulsan, shutting one of the three crude distillation units (CDUs) of its 669,000 bbl/day refinery, with some reduction in propylene output of the residue fluid catalytic cracker (RFCC) at the site, industry sources said.

Other downstream operations at the site were not affected, but this could not be immediately confirmed with the company.

Its Onsan complex can produce 910,000 tonnes/year of propylene; 187,000 tonnes/year of ethylene; 600,000 tonnes/year of benzene; and 1m tonnes/year of paraxylene (PX), according to the ICIS Supply & Demand Database.

The company was planning to restart the No 3 CDU by 27 February, news agency Reuters reported, quoting unnamed sources.

2023 NET PROFIT SLUMPS
S-Oil posted a 54.9% slump in net profit, with sales sliding by about 16% to as operating rates across its plants declined.

in billion won (W) FY2023* FY2022 Yr-on-yr % change
Revenue 35,726.7 42,446.0 -15.8
Operating income 1,354.6 3,405.2 -60.2
Net income 948.8 2,104.4 -54.9

*Revised figures from S-Oil on 26 February 2024

in billion won (W) FY2023 FY2022 Yr-on-yr % change
Refining operating profit 399.1 2,344.3 -83.0
Petrochemical operating profit 203.7 -49.8 -509.0
Lube operating profit 815.7 1,110.7 -26.6

Source: S-Oil presentation, 2 February 2024

Average operating rates across the company’s plants declined and were in the  range of 75.1% to 90.4% in 2023 due to weakening global demand, with paraxylene (PX) plants registering the lowest run rate.

Source: S-Oil, February 2024

2024 OUTLOOK
“Regional refining markets are forecast to maintain an above average level by steady demand growth coupled with low inventory levels,” S-Oil said.

Refining margins in the first quarter will likely be supported by “heating demand in winter and spring maintenance season”, it said.

“With uncertainties on start-up timing and pace of major new refineries, market impact is estimated to be restricted in 2H [second half] or beyond,” the company said.

Paraxylene (PX) and benzene markets “are projected to be supported by firm demand growth” on the back of new downstream expansions as well as demand for gasoline blending, “amid drastically reduced capacity addition”.

Polypropylene (PP) and propylene oxide (PO) markets “are likely to gradually improve in tandem with pace of China’s economic recovery, while pressures from capacity addition continues”, while for lube base oils (LBO), the product spread is projected to be solid “on limited capacity additions and sustained demand growth”, according to S-Oil.

Thumbnail image: S-Oil’s Residue Upgrading Complex (RUC) and the Olefin Downstream Complex (ODC) in Ulsan, South Korea (Source: S-Oil)

Focus article by Pearl Bantillo

($1 = W1,334)

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