S-Oil to OK $6 billion Shaheen project as Saudi prince heads to Seoul

S-Oil Corp., the South Korean unit of Saudi Arabian Oil Co., will approve the much-touted 8 trillion won ($6 billion) Shaheen project to expand its petrochemical business.

S-Oil, Korea’s third-largest oil refiner, will hold a board meeting on Thursday to approve the spending plan, the largest-ever investment in the country’s refining and petrochemical industry, people familiar with the matter said on Monday.

The approval will be timed with the planned visit to Seoul by Mohammed bin Salman, the crown prince and prime minister of Saudi Arabia, on the same day, the people said.

As the de facto ruler of Saudi Arabia, he controls state-owned Saudi Aramco, which is the largest shareholder of S-Oil.

The megaproject titled Shaheen, meaning hawk in Arabic, will build facilities at S-Oil’s main plant in Ulsan, southeast of Seoul, to manufacture petrochemical products such as ethylene and polyethylene (PE).

The company will break ground on the plant next year with a plan to complete construction work by 2026, sources said. When completed, the factory will have an annual production capacity of 1.8 million tons.

The project was estimated at around 7 trillion won when it was conceived in 2019, but the Korean currency’s weakness against the dollar over the past year has ballooned the costs, the sources said.

TRIPLE WHAMMY

The huge investment plan comes as Korea’s major oil refiners and importers are facing a triple whammy of challenges — a softening won, increasing inflation and higher interest rates.

The Saudi Aramco unit has been striving to diversify its business portfolio away from crude refining to limit the negative impact of volatile oil prices on its profits.

As a result of the latest investment, petrochemicals would account for 25% of the company’s total sales revenue by 2030, up eight percentage points from 17% in 2021.

Annual revenue from its petrochemical business would rise to $1.53 billion, or about 8% of the company’s overall sales, given the price of ethylene, which stood at $850 a ton earlier this month.

The 8 trillion won ($6 billion) Shaheen project is also expected to boost construction work projects and create jobs in the Ulsan region, industry officials said.

Write to Ik-Hwan Kim and Jun-Ho Cha at lovepen@hankyung.com
In-Soo Nam edited this article.