[News Inside Companies] S-Oil Makes 'Generous Investment' Ahead of Bin Salman's Visit to Korea

On the 16th, a banner commemorating the visit of Crown Prince Mohammed bin Salman of Saudi Arabia was hung at the headquarters of S-OIL in Mapo-gu, Seoul. S-OIL is a subsidiary of Saudi Aramco, where Crown Prince bin Salman is the major shareholder. / Photo by Yonhap News

S-OIL decided on the 17th to invest trillions of won in a mega petrochemical facility, accelerating its efforts to transform from a refining company into a chemical company. This investment was announced in line with the visit schedule of Saudi Crown Prince Mohammed bin Salman to Korea.

According to industry sources, S-OIL held a board meeting on the same day and approved the final investment for the 'Shaheen' project. Shaheen, an Arabic word meaning falcon, is a plan to build a mega petrochemical facility worth approximately 7 to 8 trillion won in Ulsan. This plant will be used as a steam cracker and olefin production site, which are basic raw materials known as the "rice of petrochemicals."

The investment decision coincided with Crown Prince bin Salman's visit. Known as the "real power holder of the Saudi royal family," Crown Prince bin Salman is the major shareholder of Aramco, Saudi Arabia's state-owned oil and gas company. Aramco owns about 63% of S-OIL's common shares through its overseas subsidiary, Aramco Overseas Company (AOC), headquartered in the Netherlands. There is growing anticipation that cooperation between Aramco and S-OIL will strengthen further following the Crown Prince's visit.

From Korea-Iran Joint Venture to Saudi Aramco Subsidiary

S-OIL originated in 1976 as a joint venture company called 'Korea Iran Petroleum Co., Ltd.' established by Ssangyong Cement Industrial Co. and the National Iranian Oil Company with a 50:50 stake. In 1980, it built its first refinery in Ulju-gun, Ulsan, producing gasoline.

However, the entry of Iranian oil companies into Korea did not last long. Due to the revolution triggered in 1979, Iran was thrown into turmoil, and Iranian capital withdrew back to its home country. Subsequently, Ssangyong acquired all remaining shares, renaming the company 'Ssangyong Refining Co., Ltd.' Under Ssangyong, the company expanded its business by producing various fuels such as gasoline and lubricants.

S-Oil's refinery in Ulju-gun, Ulsan City / Photo by Yonhap News

However, following the 1997 Asian financial crisis, Ssangyong Group underwent restructuring, and Ssangyong Refining Co., Ltd. was left isolated. Ssangyong sold its stake in the refining company, separating it from the group. Later, AOC acquired this stake, and in 2000, the company changed its name to S-OIL.

Efforts to Shift from Refining to Chemicals... Research Collaboration with Aramco

Despite a tumultuous early period, S-OIL has steadily grown over the past decades. The Ulju refinery, once a small gasoline plant, has now transformed into a representative refining and petrochemical complex in Ulsan. Moreover, S-OIL is striving not only to be a leading player in Korea's refining industry but also to expand its business into petrochemicals.

Already, at the end of 2018, S-OIL began operating the 'RUC&ODC,' a refining and petrochemical integrated complex. Covering 485,000 square meters?equivalent to 68 soccer fields?this facility processes inexpensive residual oil into high value-added products such as polypropylene and propylene oxide. Furthermore, in 2020, S-OIL announced a new growth strategy called 'Vision 2030,' aiming to increase the petrochemical business share from 12% to 25% of the group's total production volume. The Shaheen project, decided on the 17th, is part of this plan to increase the petrochemical business share.

In particular, the Shaheen project is expected to lay the foundation for strengthening future cooperation between S-OIL and its parent company, Aramco. Earlier this year, S-OIL signed a memorandum of understanding (MOU) to introduce Aramco's TC2C (Thermal Crude to Chemicals) technology, which converts crude oil into petrochemical feedstock, into the Shaheen project. Additionally, they plan to jointly research domestic storage, supply, and utilization methods for hydrogen and ammonia.