S Korea’s S-Oil earmarks W3.5 trillion for Shaheen project in 2025

SINGAPORE (ICIS)–S-Oil plans to spend about South Korean won (W) 3.5 trillion ($2.4 billion) in its Shaheen crude-to-chemical project in Ulsan, which accounts for the bulk of the refiner’s capital expenditure (capex) set for the year.

• Shaheen project on track for H1 ’26 completion
• S-Oil plants run below full capacity over past three years
• Full-year net loss caused by heavy refining losses, lower petrochemicals profit

The project capex for the year was increased by about a third from W2.61 trillion in 2024, and accounts for 86% of the total for the current year, S-Oil stated in a slide presentation to investors dated 24 January upon announcing its Q4 results.

The project, whose name was derived from the Arabic word for falcon, is now 55% complete and is on track for commercial operations in H2 2026, S-Oil said on 17 February.

S-Oil is 63%-owned by Saudi Aramco, the world’s biggest exporter of crude oil.

Shaheen will have a 1.8 million tonne/year mixed-feed cracking facility; an 880,000 tonne/year linear low density polyethylene (LLDPE) unit; and a 440,000 tonne/year high density PE (HDPE) plant.

The site will have a thermal crude-to-chemical (TC2C) facility, which will convert crude directly into petrochemical feedstocks such as liquefied petroleum gas (LPG) and naphtha, and the cracker is expected to recycle waste heat for power generation in the refinery.

“The project is progressing smoothly as planned,” S-Oil had said in the presentation, noting that completion rate as of end-December stood at 51.8%.

Installation is underway for 10 cracking heaters, pipe rack modules at steam cracker and aboveground piping, it added.

Construction of the multibillion US dollar project at the Onsan Industrial Complex of Ulsan City started in March 2023, with mechanical completion targeted by the first half of 2026.

Over the past two years, S-Oil had poured nearly W5 trillion into the project, about half of the estimated project cost of $7 billion, based on capex.

“Shaheen Project is a pivotal expansion into chemical business with industry-leading competitiveness, which will enable another leap forward in future profit generation capacity,” S-Oil said.

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

At its Onsan site, S-Oil currently produces a range of petrochemicals and fuels including benzene, mixed xylenes, ethylene, methyl tertiary butyl ether (MTBE), paraxylene, polypropylene, propylene, propylene oxide, biodiesel, and potentially bio-based aviation and other bio-derived products.

The second-biggest item in S-Oil’s 2025 capex list is upgrade & maintenance at W463 billion, up by more than 75% from 2024, noting that its residual fluid catalytic cracking unit (RFCC) is scheduled for turnaround this year, based on the presentation.

For the past three years, the company’s plants have not been running at full capacity, with a marked reduction of run rates at its paraxylene (PX) plants.

For the whole of 2024, the company incurred a net loss of W163.4 billion, reversing the profit of nearly W1 trillion in the previous year, on heavy losses from refining and a 29% profit decline in petrochemicals.

in billion won (W)	Q4 2024	Q4 2023	Yr-on-yr % change	FY2024	FY2023	Yr-on-yr % change
Revenue	8,917.0	8,830.0	1.0	36,637.0	35,727.0	2.5
Operating income	260.8	(56.4)	–	460.6	1,354.6	(66.0)
Net income	(102.1)	160.5	–	(163.4)	948.8	–
Refining operating profit	172.9	(311.3)	–	(245.4)	353.5	–
Petrochemical operating profit	(28.1)	33.9	–	134.8	190.6	(29.3)
Lube operating profit	115.9	221.0	(47.6)	571.2	810.5	(29.5)

In the first quarter of 2025, S-Oil expects additional demand for PX and upstream benzene as new downstream facilities start up, “offsetting ample supply”, it said, adding that a recovery in gasoline blending demand may further support the markets.

Polypropylene (PP) and propylene oxide (PO) will “continue to see capacity expansions in China while demand recovery is anticipated from China’s economic stimulus measures,” it said.

China, the world’s second-biggest economy is a major market for South Korean exports.

Amid an economic slowdown, the Chinese government have been introducing measures to boost consumption and revive its ailing property sector.

Focus article by Pearl Bantillo

($1 = W1,441)