S-Oil’s Shaheen project in South Korea 42% complete

SINGAPORE (ICIS)–South Korean refiner S-Oil’s new petrochemical complex in Ulsan is now 42% complete as of end-October and is on track for completion in 2026.

• Shaheen accounts for about 87% of full-year 2024 capex
• Project progress slightly ahead of schedule
• S-Oil swung to Q3 net loss on poor refining, petrochemical margins

Construction of the $7bn project called Shaheen – Arabic word for falcon – at the Onsan Industrial Complex of Ulsan City started in March 2023.

Its mechanical completion is targeted by the first half of 2026.

Total capital expenditure (capex) for the Shaheen project is projected at W2,716 billion ($1.95 billion) in 2024, up 85% year on year, and accounts for about 87% of S-Oil’s overall capex this year.

The company’s full-year capex at W3,136 billion, which includes costs of upgrade and maintenance works as well as marketing-related expenses, represents a 54% increase from 2023 levels.

The Shaheen project will have a 1.8m 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 polyethylene (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.

Saudi Aramco, the world’s biggest crude exporter, owns more than 63% of S-Oil.

The project update was included in S-Oil’s presentation slides on its Q3 financial results released on 4 November.

The company swung to a Q3 net loss of W206 billion amid a sharp decline in refining and petrochemical earnings.

in South Korean won (W) billion	Q3 2024	Q3 2023	% Change	Jan-Sept 2024	Jan-Sept 2023	% Change
Revenue	8,841	9,000	-1.8	27,720	25,897	7.0
Operating income	-415	859		200	1,411	-85.8
Net income	-206	545		-61	788

The petrochemicals unit of S-OIL posted an operating income of W5.0 billion in the third quarter, an 89% year-on-year drop.

Paraxylene (PX) and benzene markets weakened in Q3 due to increased supply amid reduced gasoline blending demand and restarts of production facilities after turnarounds.

The company’s PX spread to naphtha weakened to $271/tonne in Q3 from $425/tonne in the same period last year, while the benzene-naphtha spread rose to $315/tonne from $251/tonne in the same period a year earlier.

In the downstream olefin market, polypropylene (PP) was bearish in the third quarter due to “abundant regional supply amid weak downstream demand”.

The refining unit posted an operating loss of W573.7 billion in the third quarter, swinging from the W666.2 billion profit in the same period a year earlier.

The loss in the refining segment was mostly due to the one-off impact from the decline in oil prices and foreign exchange rates.

On market conditions, the company said that the supply-demand environment and margins for refiners in Asia is expected to “gradually improve due to reduced operating rate from low margin condition and heavier maintenances year over year, amid continued stockpiling if winter heating oil”.

For Q4, the company expected the PX and benzene markets to be supported by fresh demand from new downstream capacities while gasoline demand stays slow.

For downstream olefin markets, S-Oil said that PP and propylene oxide (PO) markets may show modest recovery “depending on the impact of China’s economic stimulus measures amid ongoing capacity additions”.

Focus article by Nurluqman Suratman

($1 = W1,395)