S-Oil Corp., South Korea’s third-largest oil refiner and subsidiary of Saudi Arabian Oil Co. (Aramco), has reported a significant downturn in its financial performance for 2023, with operating profit plummeting by 58.3% to 1.42 trillion won ($1.1 billion) from 3.41 trillion won the previous year. This decline reflects the broader challenges faced by the refining sector, including weaker global oil prices and reduced refining margins.
Sales also took a hit, dropping 16% to 35.73 trillion won from 42.45 trillion won, while net profit decreased by 53% to 998.2 billion won from 2.1 trillion won. The company attributed the decline in sales to falling product prices triggered by global oil market trends, alongside impacts from extensive maintenance activities and diminished refining margins.
S-Oil’s oil refining business saw a sharp decrease in operating profit from 2.34 trillion won to 399.1 billion won. However, its petrochemical business demonstrated resilience, turning around from a loss to post a 203.7 billion won operating profit. The lubricants division, while still profitable, experienced a reduction in operating profit to 815.7 billion won from 1.1 trillion won.
Despite these challenges, S-Oil managed to return to operating profit in the fourth quarter of 2023, posting 7.6 billion won, a significant improvement from a 160.4 billion won loss in the same period a year earlier. However, quarterly sales and net profit witnessed declines, and the refining business recorded an operating loss, highlighting the ongoing pressures on the sector.
The company noted that regional refining margins were squeezed in the fourth quarter due to seasonal demand slowdowns and mild weather conditions, although low inventory levels provided some support. It also observed that benchmark Dubai crude prices fell largely due to increased non-OPEC crude oil output, with OPEC+ production cuts helping to mitigate further declines.
Looking ahead, S-Oil is optimistic about the regional refining margins, anticipating they will remain above average in 2024, supported by steady demand growth and low inventories. The company also plans maintenance for its No. 1 crude distillation unit and expects solid growth in key product markets, with the Shaheen project’s completion slated for the first half of 2026. Despite escalating costs due to currency fluctuations, S-Oil remains committed to this strategic investment, expected to enhance its petrochemical production capabilities significantly.
