Tough 2018 for Korean Base Oil Refiners


South Koreas four major base oil refiners – SK Lubricants, S-Oil, GS Caltex and Hyundai Shell Base Oil – each reported a deep cut in operating profit for 2018, despite higher sales revenue for the year.

SK Lubricants

SK Innovation earned 460.7 billion won (U.S. $410.8 million) of operating profit from its base oil and lubricants segment in 2018, an 8.8 percent decrease from 504.9 billion won a year ago. Sales for the year grew 7.2 percent to 3.3 trillion won from 3 trillion won, the South Korean refiner said in its earnings report.

Operating profit for the fourth quarter plunged 49.2 percent to 74 billion won, from 145.7 billion won in the same period the previous year. Fourth-quarter sales, however, went up to 845.7 billion won, a 4.2 percent rise from 811.9 billion won.

SK said in a press release, Operating profit from [the base oil] business decreased in 2018 because of new capacity addition in the market and inventory-related loss caused by oil price plunges in the fourth quarter. With the slowdown of the global economy and Group II capacity additions, the market seems to be more competitive this year. But we will improve profit by reducing cost and increasing sales volume.

SK Lubricants – the worlds largest supplier of API Group III base stocks – operates base oil plants in Ulsan, South Korea; Cartagena, Spain; and Dumai, Indonesia.


S-Oil also saw its lube base oil operating income decline to 259.1 billion won, down 38.3 percent from 420.2 billion won in the previous year. Revenue inched up 1.3 percent to 1.6 trillion won.

In the fourth quarter, operating income dropped to 50.9 billion won from 87.8 billion won, a 42 percent fall from the same period in 2017, but revenue grew 1.8 percent to 426.8 billion won.

In the fourth quarter, the base oil spread rebounded due to feed stock price drop and solid demand for high-quality product in our key markets, Go Gwangchol, S-Oil investor relation team leader, said during the earnings conference call.

GS Caltex

GS Caltex reported that operating profit from its lubricants business slid 2.9 percent to 190.5 billion won for the year of 2018, but its revenue has grown to 1.3 trillion won, an 18.7 percent increase year on year.

For the three months ended Dec. 31, operating profit fell to 21 billion won from 40.5 billion won, a 48.1 percent drop. Revenue slid up 3.3 percent to 307.5 billion won from 297.7 billion won a year ago, GS said in its quarterly earnings report.

The 50:50 joint venture of GS and Chevron has the capacity to produce 26,000 barrels per day of base oil at its plant in Yeosu and 9,000 barrels per day of finished lubricants at its blending plant in Incheon.

Hyundai Shell Base Oil

Hyundai Shell Base Oils 2018 operating profit plummeted 46.9 percent to 65.7 billion won from 123.7 billion won, Hyundai Oilbank announced. Meanwhile, its sales increased 3.3 percent to 732 billion won, up from 708 billion for 2017.

In the fourth quarter, operating profit of the 60:40 joint venture between Hyundai Oilbank and Shell dropped to 1.8 billion won from 21 billion won, a 91.4 percent nosedive. Sales reached 183.6 billion won, a 7.3 percent increase from 171.1 billion won.

On this huge profit decrease, Hyundai cited inventory loss, following crude price drops, as well as decreased demand due to recession as the reasons in its earnings conference call.

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