SEOUL, April 24 (Yonhap) -- Strategic partnership with Mideast oil producers may help South Korean refiners combat problems facing them such as sluggish domestic demand for oil products and growing competition in oil export markets.
The head of the country's third largest refiner has said.
The remarks of Nasser Al-Mahasher, the chief executive of S-Oil Corp., came at the Middle East Petroleum & Gas Conference held in the United Arab Emirates on Tuesday.
"The (oil refining) industry has been facing new challenges lately represented by stagnant demand in the domestic market, intensifying competition in export markets and slimming refining margins," said the S-Oil head.
Last year, South Korean refiners, including SK Innovation Co., the holding company of South Korea's biggest refiner SK Energy Co, scaled back their research and development expenditures due to lackluster earnings stemming from lower refining margins.
SK Innovation's operating profit fell 42.5 percent in 2012 compared with the previous year, with the second-largest refiner GS Caltex Co.'s operating profit tumbling 73.7 percent. S-Oil and No. 4 player Hyundai Oilbank Co. saw their operating profits fall 53.9 percent and 48.3 percent, respectively, during the same period.
Al-Mahasher suggested a stable crude supply as the shortcut for Korean refiners to tide over the current crisis, saying, "Forging stronger ties with countries capable of providing resources is the solution to a win-win situation rather than pursuing energy independence by lowering the portion of imported crude."
He also said the expansion of their presence in new export markets like Japan and Australia will also be another way to overcome the local refiners' challenges.
Al-Mahasher said the large-sized expansion of refining plants in India and the Middle East in recent years is threatening profits of local refiners in global markets.
The S-Oil head predicted that oil products for heating and electricity like kerosene in South Korea will be replaced with liquefied natural gas (LNG) that could be provided at a price lower than oil products thanks to the development of U.S. shale gas.
He has served as CEO of S-Oil since March 2012.
