Kwon Oh-gap's Leadership Shines in Crisis... Hyundai Oilbank Breaks Through Recession with Two-Track Strategy

Plan to Reduce Costs by Increasing the Proportion of South American Crude Oil Input in the Second Half
Upgrading Rate to 40% through Facility Investment Expansion
Strategy by Chairman Kwon Oh-gap Emphasizing Core Business Competitiveness Enhancement

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Oilbank plans to minimize losses by expanding the proportion of low-cost South American crude oil amid the management crisis caused by the COVID-19 pandemic, while also expanding its new business of 'hydrogen charging stations.'

According to the industry on the 25th, Hyundai Oilbank plans to increase the proportion of South American extra-heavy crude oil input from 33% in the second quarter to about 40% in the second half of the year. Due to the market conditions in the second half falling short of expectations, the company decided to expand the proportion of Mexican crude oil input.

The average import price of South American extra-heavy crude oil in August is about $35.15 per barrel. This is approximately $10 cheaper than the prices of Middle Eastern crude oils mainly imported by Korea, such as Saudi Arabian ($46.57), Kuwaiti ($45.82), and Iraqi ($43.35) crude oils, and is also lower than the total average import price of $44.67 per barrel. When the market conditions worsened in the second quarter due to the COVID-19 pandemic, Hyundai Oilbank expanded the proportion of Mexican crude oil input, achieving cost savings of about 60 billion KRW.

▲Kwon Oh-gap, CEO of Hyundai Heavy Industries Holdings (tentative name)

The reason Hyundai Oilbank can expand the proportion of Mexican crude oil input is thanks to the facility upgrading emphasized by Kwon Oh-gap, Chairman of Hyundai Heavy Industries Holdings. South American extra-heavy crude oil contains many impurities such as sulfur, making upgrading facilities essential to convert it into light oil. Hyundai Oilbank, which was the first domestic refinery to introduce upgrading facilities (FCC) in 1989, increased the ratio of upgrading facilities to 39.1% by completing the second FCC after Chairman Kwon took office as the first president in 2010. As of August this year, Hyundai Oilbank's upgrading facility ratio is 40.6%, the highest among the four major domestic refineries. This is why Hyundai Oilbank was able to expand the proportion of Mexican crude oil input to 33% in the second quarter, unlike its competitors.

While strengthening its refining business, Hyundai Oilbank also unveiled a blueprint for its new business, 'hydrogen charging stations.' The industry analyzes that Hyundai Oilbank's new business push is a strategic move toward an initial public offering (IPO) in the long term. Hyundai Oilbank plans to install 80 hydrogen charging stations based on its gas station infrastructure by 2025 and gradually expand to 300 stations by 2040. The acquisition of SK Networks' directly operated gas stations, completed in May, became a momentum for the new business. Through this, Hyundai Oilbank now owns the largest number of directly operated gas stations nationwide (400 locations), which can be utilized as infrastructure for the hydrogen charging station business. The hydrogen sold at the hydrogen charging stations will be produced by Hyundai Chemical, a joint venture between Hyundai Oilbank and Lotte Chemical. Byproduct hydrogen generated during ethylene production will be sold to the hydrogen charging stations as part of the strategy.

Han Young-soo, a researcher at Samsung Securities, explained, "Hyundai Oilbank is a key subsidiary that accounts for half of the corporate value of Hyundai Heavy Industries Holdings," adding, "Its superior profitability defense compared to competitors is expected to continue for a considerable period, allowing for a valuation premium."

This content was produced with the assistance of AI translation services.