By Kim Hyun-cheol
Staff Reporter
Refineries are struggling to keep their losses to a minimum amid the plunging value of the won and falling oil prices.
In the first half of the year, the country's four major refineries lost 808.4 billion won ($58.3 million) on exchange-rate swings, the Korea National Oil Corporation said Thursday. Should the trend continue, the total of their losses may exceed 1 trillion won by the end of the year, it added.
During the third quarter, GS Caltex, the nation's second largest refiner, lost almost as much as its second-quarter net profit of 328 billion won.
The company had already posted a 23.2 billion won deficit in the first quarter, for the first time in 11 years, thanks to the worsening won-dollar rate and spending on facilities expansion.
``The whole company is in shock," a GS spokesman said on condition of anonymity. ``Operating profits are close to the worst ever this quarter.''
SK Energy said it expects its third-quarter operations to remain profitable, but can't be sure on ordinary profits on sales and net profit. Hyundai Oilbank is facing the prospect of a huge deficit, while S-OIL, which has the biggest export portion in the business portfolio among the four firms, is in a relatively stable position profit-wise.
Refineries usually borrow from banks for crude oil purchases and pay the loans back after two to three months. This means a soaring exchange rate will likely haunt them, unless it stabilizes.
A 10-won fall against the dollar means an additional loss of 70 to 80 billion won.
`` The margins on refining started to deteriorate from the end of June, due to the fluctuating oil prices,'' said Lee Dong-hoon, a public relations manager at S-OIL. ``Petroleum product markets are more flexible and less sensitive than those of crude oil, due to their comparative diversity.''