Hyundai Oilbank's Daesan factory in Seosan, South Chungcheong Province / Courtesy of Hyundai Oilbank

Hyundai Oilbank CEO Chu Young-min

By Park Jae-hyuk

Hyundai Oilbank was informed last October of the Ministry of Environment's plan to fine it 150.9 billion won ($122 million) for its alleged illegal misuse of wastewater, according to the oil refiner's parent company HD Hyundai, Tuesday.

The size of the fine is larger than any other penalties that have been imposed on violators of environmental laws in Korea.

"Hyundai Oilbank just received a prior notification about the environment ministry's plan to impose a 150.9 billion won fine, and it is still unclear whether the ministry will really impose the fine," HD Hyundai said in its regulatory filing last Friday. "We are cooperating sincerely with investigations by relevant institutions."

In particular, the environment ministry is questioning Hyundai Oilbank's sending of waste from its Daesan factory in Seosan, South Chungcheong Province, to a nearby plant of its subsidiary, Hyundai OCI, between October 2019 and December 2021 to reuse the wastewater for producing carbon black.

The environment ministry pointed out that the wastewater sent from Hyundai Oilbank to Hyundai OCI contained higher-than-permitted levels of phenol. However, it did not contaminate the environment, as Hyundai OCI released the wastewater after purification.

Regarding the case, prosecutors also searched Hyundai Oilbank's headquarters and summoned former CEO Kang Dal-ho late last year. The environment ministry and the prosecution will announce the results of their joint investigation and the actual size of the fine in the near future.

If the environment ministry imposes the fine as planned, it is expected to weigh further on Hyundai Oilbank, amid a worsening outlook for the oil refining industry this year as well as policymakers' moves to prevent domestic refiners from enjoying windfall gains from the global oil price hike.

A Korea Chamber of Commerce and Industry survey of 2,254 manufacturers here showed that the oil refining industry was among the industries that would likely suffer the sharpest decline in sales this year, along with IT, home appliances, textiles, chemicals and nonmetal sectors. Korea Investors Service also expects the oil refining industry to generate lower profits this year.

"Due to the uncertainties about the global economy, concerns have been raised over sluggish demand," KIS analyst Kim Moon-ho said.

Even if the oil refining industry's profitability remains solid this year, this could also cause trouble for Hyundai Oilbank, as lawmakers cite the company's hefty bonuses as a reason for imposing heavier taxes on refiners.

"Hyundai Oilbank decided to pay performance-based bonuses equivalent to 1,000 percent of the monthly wage," Rep. Yong Hye-in of the minor opposition Basic Income Party wrote on Facebook. "If the National Assembly had passed the bill that I proposed last year to impose a windfall tax on oil refiners, they would have reduced their bonuses and received trillions of won in tax from them, which could have been used to support the needy and cope with climate change."

The Ministry of Trade, Industry and Energy also seeks to revise a law in order to disclose the wholesale price of gasoline to consumers, despite opposition from oil refiners. The ministry explained that the revision is intended to remove suspicions that oil refiners and gas stations took profits by not reflecting the government's oil tax cut in their product pricing.