GS Caltex Corp. Chief Executive Hur Sae-hong said on Monday he expects global oil prices, which remain elevated due to geopolitical tensions, won’t likely budge lower any time soon, which could hurt its petrochemical business.
Hur, chief executive of South Korea’s second-largest oil refiner, said if international oil prices continue to stay at the $90-a-barrel level, which he thinks is very likely, most refiners will find it hard to make ends meet as refining margins don’t keep pace.
GS Caltex CEO Hur Sae-hong
“Recent indicators show refining margins have already gone down considerably compared with the first half. OPEC’s move to control production, alongside growing geopolitical tensions, will prop up oil prices for quite a while,” the CEO said during an exclusive interview with The Korea Economic Daily on Monday.
The interview marks his first discussion with a local media organization since taking the helm of GS Caltex in January 2019.
“Higher oil prices aren’t ideal for GS Caltex and other oil refiners,” he said.
OVER THE HILL
Korea’s four major oil refiners – SK Innovation Co., GS Caltex, S-Oil Corp. and Hyundai Oilbank Co. – collectively posted record operating profits in the first half, largely driven by higher crude prices.
Oil prices will hover around $90 a barrel despite fears of a global recession and growing supply concerns in the wake of the looming European Union sanctions on Russian oil, analysts said.
In the first six months of this year, GS Caltex posted 3.21 trillion won ($2.23 billion) in operating profit, an all-time high. But its second-half outlook is grim, weighed down by its petrochemical business, which posted a 28.7 billion won loss in the first half.
“We have invested heavily in our petrochemical business, but its profitability isn’t as good as we expected. We are worried,” Hur said.
A GS Caltex refinery in Yeosu, South Korea Local brokerages forecast that GS Caltex’s operating profit would drop to between 500 billion won and 800 billion won in the third quarter.
The benchmark Singapore gross refining margin against Dubai stood at $2.1 per barrel in the second week of October, down 92.9% from this year’s high of $29.5 in the fourth week of June.
SIGHTS SET ON ECO-FRIENDLY, LOGISTICS BUSINESSES
Hur, the eldest son of GS Caltex Honorary Chairman Hur Dong-soo, joined the oil refiner in 2007 before assuming its top post in 2019.
GS Caltex, a 50-50 joint venture between US energy company Chevron Corp. and Korea’s GS Energy Corp., a GS Holdings subsidiary, is also looking to bolster its presence in the eco-friendly business and enter the logistics sector by leveraging its gas stations throughout Korea.
Separately, GS is working with POSCO International Corp. to build a palm-oil-based biodiesel factory in Indonesia.
The GS Caltex CEO said the company also seeks to transform itself into a future-mobility provider to diversify its business portfolio.
In January of 2021, GS Caltex showcased its drone technology at the Consumer Electronics Show (CES) in Las Vegas as part of its efforts to become a serious logistics player by navigating hard-to-reach areas for delivery.
“We will transform GS Caltex gas stations into drone logistics centers, while also providing an infrastructure base for electric cars and charging stations,” Hur said at the time.
