Growing
Oil Exports

SK Corp. sees profit from lube oil exports rising 76 pct with oil exports at $11 bln last year

SK Corp's posted 23.648,8 trillion won in sales last year, up 8 percent from the previous year, but operating profit and pre-tax net profit were down 3 percent and 15 percent YOY respectively last year, the company said Jan. 23.
The company blamed the slowdown in profit on the sluggish refining margin and excess supply of oil products in the domestic market. Operating profit recorded 1.678 trillion won and pre-tax net profit 1.883,4 trillion won, the company said.
Operating profit in the oil business sector, which account for 70 percent of total sales of the company, fell 28 percent last year at 331.4 billion won with Q4 profit down 344 billion won in the red. The company said the quarterly red figure was the first one since the Q2 in 2003 and the quarterly profit began to slide beginning in Q1 of last year. The operating profit of the oil sector came to only 2 percent of the company's total operating profit, and less than 4.9 percent that the sector accounted for on average.
The company said the sluggish performance came from the reductions in the oil refining margin caused by an excess in the supply of oil products brought on by reduced down time for maintenance repairs at the nation's oil refineries, stifled demand for oil due to high oil prices and heated competition.
The company said the oil sector led its sales, but the non-oil sector helped its profit to grow. An analysis of the 2006 operation results showed that the sales of the company's chemical and oil exploration sectors accounted for 35 percent of that by the oil sector, but its operating profit doubled that for the oil sector at 663.5 billion won compared to 331.4 billion won in the oil sector.
The oil sector took up 28.4 percent the company's total operating profit, down about 10 percent from the typical year predictions. But the company recouped its loss in the oil sector from its overseas operations. Its exports of oil products including gasoline, diesel and others totaled 7.100 trillion won, up 5 percent from the preceding year, while exports of chemical products and lubrication oil amounted to $11 billion, exceeding $10 billion for the second year in a row. The company said its chemical and lube oil businesses continued to grow, while the oil sector suffered setbacks. Amid high raw material prices, the early launch of the reformer plant in May helped increase operating profit by 5 percent at 448.3 billion won, while sales rose to 5.478,5 trillion won, up 14 percent from the previous year.
The lube business reaped the best performance results in its history with sales improving by 32 percent and an operating profit rising a whopping 76 percent, recording 896.6 billion won and 178.6 billion won respectively. The company explained that an increased supply of the lube oil from its lube oil production facility repair finished earlier than usual, and the rise in high-grade lube oil demand caused by strengthened environmental protection and efforts to extend gas mileage, have contributed to upgraded performance results. Increased exports due to strengthened overseas marketing programs, especially in Russia and cost reduction also played a large role in improving the lube business sector operations.
The oil exploration sector recorded a stable production with its sales totaling 335.5 billion won last year and 215.2 billion won in operating profit. The sector stepped up its activities around the world last year in new oil fields including Britain, Madagascar, and Kazakhstan to bring the number of its oil fields being explored to 24 mining blocs in 14 countries.
The company is slated to start the oil pumping in the BM-C-8 mining district in Brazil in the second half of this year, expecting that its oil production daily would come to 20,000 barrels next year. The company's condensate production is likely to increase in the 56 mining district in Peru this year, boosting profit for the company this year. The company's oil reserves will reach 440 million barrels with the addition of 2,000 barrels from the condensate from the 56 mining bloc in Peru.
The company plans to focus on making its operation solid this year with its projection for total sales not increasing much from last year at 23.850 trillion won, while doubling its effort to expand profit, projected at 1.424 trillion won, up 18 percent from last year. In the oil sector, the company expects the oil refining margin to increase, while the profit is projected to expand in the chemical sector thanks to reduce downtime for regular repairs of the production facilities. The profit projection for the lube sector is expected to rise more than 200 billion won. The company will pour some 900 billion won in facility investment this year, especially in such facilities as oil exploration and the desulphurization facilities. nw

A nightly view of SK Corp. Ulsan oil refining complex.