GS Caltex Plans to Invest
3 Tln Won over 3 Years
Will use massive investment to build third HOU
GS Caltex announced on May 6 that it would invest a total of 2.94 trillion won over the next three years. The figure represents the largest single investment in all of the refinery industry. Because of the massive figure, there has been speculation about the reason for the company's ambitious investment plan.
GS Caltex is poised to use the money for the construction of an HOU. The firm has been seeking to raise the added value of its products through investment in the state-of-the-art facility. It means the company plans to enhance the quality of the products rather than increasing production. Toward that end, the firm plans to double the portion of high technology, which now stands at only 22.5 percent with the goal of replacing relatively inexpensive light oil with pricier oil.
The high-tech facility called an HOU is a piece of equipment that deals with bunker C oil to produce high value added gasoline or kerosene. The company explains that it would be able to reap considerable fruit through the new equipment given that the price of bunker C oil remains at $90 per barrel in international markets while gasoline and kerosene are priced at $130 and $160 per barrel, respectively. It expects to earn $40 to $70 per barrel through the fresh investment.
LG Caltex suffered 24.2 billion won of net operating loss in the first quarter of this year. Despite the bad performance, the company is poised to push ahead with the new investment plan to secure profits from a long-term perspective.
The company spent 1.5 trillion won for the construction of the second HOU, which was completed in August last year. The third HOU will produce 113,000 barrels of products per day, the largest among the domestic producers. The company will be able to produce 266,000 barrels a day once the third HOU begins operation. Additionally, the firm will see the ratio of facility sophistication rise to 39.1 percent, surpassing the 25.5 percent for S-Oil.
The company plans to begin the construction next month for the new facility, which will be located in Yeosu on 615,000 square meters of land at the site of the second factory. The third HOU has been designed to cope with stricter environmental regulations and prepare for the rapid rise in demand for light oil. The firm expects to see profits improve, as it will be able to export 900 billion won worth of products annually. nw
GS Caltex's Yeosu plant
GS Caltex Chairman Hur Dong-soo