S-Oil's para-xylene manufacturing plant in Ulsan / Courtesy of S-Oil

S-Oil CEO Hussain A. Al-Qahtani

By Park Jae-hyuk

Saudi Arabia's Crown Prince Mohammed bin Salman's forthcoming visit to Korea this Thursday is expected to prompt Aramco-owned S-Oil to speed up its efforts for its vision of "oil to chemical," according to industry officials, Tuesday.

The refiner will reportedly hold a meeting of its board of directors at its Seoul headquarters on the day of the crown prince's arrival in Korea, so as to approve the company's over 8 trillion won ($6 billion) investment in the petrochemical business in Ulsan. The project is dubbed "Shaheen" which means falcon in Arabic.

The largest-ever investment in S-Oil's history is intended to lower its reliance on the refining business by building a steam cracker that can produce 1.8 million tons of ethylene annually in the southeastern port city by 2030. Ethylene is regarded as a core chemical for the petrochemical business, as it is used to produce high-value-added materials, such as polyethylene and polypropylene.

Once the board members approve the Shaheen Project this week, S-Oil will likely start its construction next year to begin production by 2026 at the earliest.

An S-Oil spokesperson declined to confirm the specific timeline for the project.

A banner hangs on S-Oil's headquarters building in Seoul to welcome Saudi Crown Prince Mohammed bin Salman's visit to Korea in this 2019 file photo. Korea Times file

Since the Saudi crown prince visited Korea in 2019 with Aramco officials, S-Oil has pushed ahead with the project to brace for the growing uncertainties over the future of the refining industry, caused by the global trend of using eco-friendly energy sources as alternatives to fossil fuels.

Amid the worsening outlook, S-Oil's third-quarter operating profit dropped 70.3 percent year-on-year to 511.7 billion won, due to falling global oil prices and refining margins. The company even suffered a 9.6 billion won net loss due to the strong U.S. dollar.

In order to dispel worries about its sustainability, S-Oil has emphasized that it will pursue the Shaheen Project, so that its revenue from the petrochemical business will account for 25 percent of its entire revenue by 2030, up from the current 12 percent.

The refiner also told investors and analysts during last month's conference call on its third-quarter earnings that it seeks to get approval for the Shaheen Project from its board of directors by the end of this year, without mentioning the specific date for the board meeting.

"We will start borrowing money for the Shaheen Project from 2024," S-Oil Chief Financial Officer Bang Ju-wan said. "Although the interest rate is rising sharply at this moment, most experts expect the rate to stabilize during the second half of next year, so investors do not need to worry about our fundraising plan."

A day after the conference call, however, S-Oil said in its regulatory filing that nothing has been decided yet regarding the project.