S-Oil Corporation posts 1.4 trillion won in Q3 operating profit, up 514% on strong base oil and refining margins

[Financial News] S-Oil Corporation posted operating profit in the 1.4 trillion won range in the third quarter of this year, buoyed by strong performance in both its base oil and refining businesses. This is believed to reflect a sharp increase in base oil profitability and export refining margins as production and logistics disruptions in the Middle East constrained supplies of petroleum products.
S-Oil Corporation said on the 2nd that it recorded revenue of 11.9687 trillion won and operating profit of 1.4067 trillion won in the third quarter of this year. Revenue rose 42.2% and operating profit 513.7% from the same period a year earlier.
The strong results were led by the lubricants division, which handles the base oil business—the source material for engine oils and industrial lubricants. The division posted revenue of 1.5424 trillion won and operating profit of 742.7 billion won. It accounted for about 53% of total operating profit, surpassing the refining division. As production disruptions and logistics constraints in the Middle East persisted, spreads—the price gap between products and feedstocks—widened, particularly for Group III base oils. Group III base oil is a high-grade base oil made by extensively refining oil derived from crude to reduce impurities and keep its viscosity relatively stable despite temperature changes. It is used as a raw material for high-performance engine oils and other products.
The refining division, which processes crude oil to produce and sell petroleum products such as gasoline, diesel and jet fuel, also contributed, recording revenue of 9.0647 trillion won and operating profit of 690.4 billion won. International oil prices surged amid rising geopolitical tensions in the Middle East, while shortages of refined products continued, keeping export refining margins high. Refining margins—the amount left after subtracting costs such as crude oil and transportation from the selling price of petroleum products—are considered an indicator of a refiner’s profitability.
The petrochemical division, which produces raw materials for synthetic fibers and plastics, recorded revenue of 1.3616 trillion won and an operating loss of 26.4 billion won. Spreads for aromatic products improved thanks to scheduled maintenance at major facilities in the region and a recovery in demand from downstream industries. However, increased supply and weak demand for polypropylene (PP), along with seasonal off-season effects on propylene oxide (PO), weighed on profitability.
S-Oil Corporation said it was keeping its facilities operating steadily despite uncertainty over crude oil supply and transportation by diversifying its sources and transport methods. It said it was using existing long-term contract volumes, alternative crude oil and swaps and loans of government stockpiled oil, while keeping shipping routes flexible through measures including ship-to-ship (STS) transfers.
The company forecast that favorable market conditions for its refining and lubricants businesses would continue in the fourth quarter. The refining division is expected to be supported by low global inventories of key products and the start of the peak season for heating oil demand. For the lubricants division, the normalization of supplies of products from the Middle East remains a variable, but tight supply and demand conditions are expected to persist, particularly for Group III products. In petrochemicals, aromatic market conditions are favorable, while improvement in downstream olefin products is expected to be limited by increased supply as new facilities come online.
The Shaheen Project, a major petrochemical investment project, is undergoing trial runs with the goal of starting operations early next year, following the mechanical completion of its main facilities. S-Oil Corporation plans to hold events in the fourth quarter of this year to mark its 50th anniversary and the completion of the Shaheen Project.
[email protected] Jung Won-il Reporter