GS Caltex successfully entered into the overseas exploration business with the Cambodian Block A Project in 2003. / Courtesy of GS Caltex

Innovation ― GS Caltex’s Byword

By Kim Hyun-cheol
Staff Reporter

``Change'' is one significant issue in the current business world, with the energy industry being no exception. In that regard, GS Caltex, Korea's second largest refiner, has been aggressively pursuing this goal.

In the first half of the year, the refiner posted nearly 9 trillion-won or $6.8-billion in total
sales, with exports making up 54 percent of this.

``In the ever-changing energy industry, it takes promptness in change surpassing all other rivals for a company to remain strong on the global stage,'' Hur Dong-soo, CEO of GS Caltex, said. ``For that purpose, each member of the company needs to pursue ceaseless renovation to lead in a changing world.''

Recent moves by the company attest to this ― GS has been active in exploring foreign markets as well as expanding facilities in existing business areas.

Its cutting-edge plants here can refine 790,000 barrels of crude oil per day and convert them into more valuable products such as gasoline and olefinic gases in its cracking facilities with a capacity of 153,000 barrels per day (bpd). High value added products are exported all over the world.

Exports are increasing thanks to stable commercialization of a second cracking facility, the construction of which was completed late last year. And the figure is expected to go higher, as GS is investing even more.

A new three trillion-won heavy-oil upgrading unit (HOU) project, to be constructed by 2010, is the largest investment in the company's history. The plant, once completed, will move GS ahead of all other Korean refineries with a capacity of 266,000 bpd.

``We have long-term plans to build additional HOUs as they are more profitable than crude oil refineries,'' said Kim Hyung-soon, vice president of HOU operations at GS Caltex.

GS is also accelerating exploration of overseas markets. Its China unit is set to go into full-scale operations supplying gas stations and petrochemicals in the world's fastest-growing market.

Starting from 2003, the company's oil exploration business has seen constant expansion ― it owns shares of oil fields in Cambodia, Thailand and Vietnam.
In the long term, it plans to supply up to 10 percent of its daily refining needs through its own exploration work. For this purpose, it is expanding cooperation with domestic and foreign energy firms, as well as its strategic ties with GS Holdings, the holding company of GS Caltex.

Exploring New Markets

Breaking out of its traditional business routine of importing crude oil and manufacturing petroleum products to sell on the domestic and overseas markets, GS Caltex is aggressively expanding its overseas businesses and exploring new territories such as recyclable energy as a future growth engine.

The company launched commercial production of lubricating base oils at its plant complex in Yeosu, South Jeolla Province, in October last year, at a 1.5 trillion joint venture HOU facility and a base oil plant.

Ultimately, the base oil plant will have the capacity to produce 12,000 bpd of API Group II and 4,000 bpd of Group III under the new brand name Kixx Lubo.

With the energy market becoming saturated, GS turned its attention overseas years ago, especially to China, one of world's fastest growing economies.

The company had looked into strategies to enter the country from 2003, before starting its push in 2006. That year, GS acquired Langfang Jiashi Chemical, a Chinese polypropylene manufacturer and a supplier to Hyundai Motor, Kia Motors and LG Electronics, for $4.3 million.

Langfang Jiashi's annual sales reached 10.5 billion won in 2005, but after the GS acquisition they surged to 25 billion won in 2006, and around 40 billion won last year.

Also in June 2007, the refiner founded its Chinese unit, GS Caltex Qingdao Petroleum, to tap into the local petroleum market. It built its first two gas stations in Qingdao in November and commenced operations in February this year.

Not just selling petroleum products, GS Caltex's gas stations aim to offer high-quality services to Chinese customers, including facilities such as the autoOasis light maintenance shop, and advanced customer management and operation systems.



New Technologies

As a core next generation growth engine, recyclable energy is one of the new businesses GS Caltex is focused on. Based on its accumulated know-how from related businesses, the company is working on the development of fuel cells for household and commercial use, and hydrogen stations for fuel cell hybrid vehicles.

Also, the company is making progress in producing carbon materials for a super-capacitor, a secondary fuel cell that has great potential in automotive applications for hybrid vehicles and as a supplementary storage device for vehicles running on batteries.

GS Caltex built a new R&D institute in Seoul in 2006 for integrated research and development in the field. It is currently looking into technologies to produce hydrogen from fossil fuels, and production from water by using recyclable energy such as solar or wind power.

The company has faced rough sailing in the second half of the year but this has not deterred the firm's determination to reinvent itself.

During the third quarter, it is estimated to have lost hundreds of billion won, almost as much as its second-quarter net profit, due to the plunging value of the won and falling crude oil prices.

A large part of the deficit resulted from the refinery's recent spending on the expansion of facilities, including the HOUs, which convert heavy oil into more valued products such as jet fuel.

Taken by some as being risky, those moves come from the company's belief that active engagement in the newest trends of the business is the best way to survive on the global stage, as shown in its endless efforts to push its boundaries.

Originally formed in 1966, GS Caltex is a joint venture of South Korean company GS Holdings and U.S. oil giant Chevron. Caltex was created in 1936 as an overseas joint venture between Chevron and Texaco, and was absorbed when Chevron acquired Texaco in 2001. In 2004, GS Holdings was spun off from LG Corp.

In 2005, the company was reborn as GS Caltex in the wake up of the separation of GS Group and LG Caltex from LG.

``The leader in providing total energy services'' underlines GS Caltex's ultimate goal of becoming a competitive and respected company through the integrated and strategic promotion of its corporate image.

hckim@koreatimes.co.kr