Aggressive investment in non-refining businesses have helped Korean oil refineries secure and boost operating profits in the first half of this year, with major companies showing record high performances, market analysts said Tuesday.

In the first half of this year, SK Innovation’s operating profit hit a record high of 1.96 trillion won ($1.17 billion). This is the first time that operating profit for a local oil refinery has reached nearly 2 trillion won in half a year. 


While the lagging effect prompted by the gradual rebound of oil prices contributed to the figure, the company’s advanced investment strategies also played an important role, industry insiders said.

Since 2011, SK Innovation has aggressively invested in the supply of paraxylene, which is mainly used as a material for PET bottles and polyester.

In 2013, it injected 1.6 trillion won to expanding the paraxylene facilities of SK Incheon Petrochem which was acquired in 2005.

It also invested 1 trillion won in Ulsan Aromatics, a joint venture made with Japanese company JX Energy.

“The chemical business played a core role in the non-oil refining sector as it drew the best performance in history. Such an outcome was possible as the company has focused on the high value chemical sector,” said an official from SK Innovation.

Of the company’s 1.2 trillion won operating profit in the second quarter, the chemical business accounted for nearly half at 527 billion won. The lubricant unit made up 265 billion won.

SK Innovation forecast that it will likely make more than 3 trillion won in operating profit by the end of this year, exceeding the highest record of 2011 when the figure reached 2.95 trillion won.

The advanced investment strategies also supported No. 3 oil refiner S-Oil.

S-Oil recorded 623 billion won of operating profit in the second quarter, up by 6.1 percent on-year, despite the 18.4 percent sales decline to 4.2 trillion won.

The non-oil refining businesses contributed to the rise in operating profit, the company said.

“High value petrochemicals such as paraxylene and lube base oil played a major role in the profit growth,” the company said.

Although the non-oil refining business accounted for 23.4 percent in sales, it made up 41.7 percent of the operating profit.

In 2011, S-Oil doubled its paraxylene supply capacity to 1.8 million tons a year by injecting about 1.4 trillion won into facilities.

As part of a move to save cost, the company has since last year been revamping facilities to maximize profitability under the project called Super Project.

In the first half of this year, the company saved about 110 billion thanks to the project, the company said.

S-Oil plans to carry out the second round of the project in the late third quarter and projects that it could further save costs.

By Lee Hyun-jeong (rene@heraldcorp.com)