By Kim Tong-hyung
Staff Reporter
The year has been anything but smooth for the country's oil refineries, who, after scrambling to cope with the dramatic fluctuation in oil prices for months, are now bracing for possible industrial action over failed wage deals.
Unionized workers at S-Oil, the country's third-largest refinery, declared a breakdown in their contract negotiations with management and filed for arbitration to the National Labor Relations Commission Wednesday.
The management had suggested a 2 percent increase in base-pay rates, which was far from the union's demand for a 7.8 percent raise.
The company claims it can't afford to loosen its purse strings too much, considering the lengthening economic turmoil that has cast a murky outlook for 2009.
However, workers were hardly sympathetic when the company spent a larger amount than its net income for dividend payments last year, while freezing wages for the last two years, and is also planning lavish payouts this year.
In a recent regulatory filing, S-Oil announced its third-quarter dividend per share at 1,750 won, which translates to a total payment of 203.7 billion won, larger than the company's 130 billion won in quarterly net income.
``The company has been posting record earnings in the past two years and we can't be asked to compromise again,'' said Choi Dong-hoon, one of the vice presidents of S-Oil's labor union, who said the union agreed to freeze wages to allow management to improve its compensation of non-regular workers.
`` The company spent around 408.1 billion won in dividend payments during the second and third quarters, but then tells us it can't give us more than a 2 percent raise. The workers are complaining that the management is more interested in keeping our owner and big shareholders pleased than the future of the company itself,'' he said.
S-Oil is not the only refinery experiencing difficulties in wage negotiations. The union and management at SK Energy, the country's largest refiner, seemed close to agreeing on a 2 percent raise, but talks fell through over setting the level of performance-based pay and other clauses.
Management had requested an extension to the talks, saying they need more time to finalize the new payment systems, but union officials are threatening collective action.
``The union and management were supposed to form a joint committee to decide on a concrete system for performance-based pay and other payment structures by Nov. 15, but management has been rejecting the union's plans without suggesting alternatives,'' said a spokesman from the SK Energy union.
Winter Blues
S-Oil management is reluctant to give their workers a significant raise when increasing volatility in oil markets adds uncertainty to the company's business prospects.
Gasoline prices have fallen to the point where fuel is now actually cheaper than the crude oil it is made from, thus squeezing the margins of the refineries.
According to the Korea National Oil Corporation (KNOC), the price of 92-octane gasoline closed at $42.35 a barrel in the international oil market on Wednesday, compared to Dubai crude's $46.62.
The prices of bunker-C and naphtha are also plumbing new depths, with refineries bracing for a significant dip in their fourth quarter profit, company officials said.
``The global economic downturn is resulting in the plunging of gasoline and naphtha prices, the demand for which is directly related to consumer confidence,'' said an S-Oil spokesman.
``Only heating oil is trading at higher prices than crude, but that is not enough to make up for the skids in naphtha, bunker-Co and other oils,'' he said.
However, union officials continue to mention the company's comparatively high dividend payments as they pressure the company for a raise.
S-Oil is the only of the country's four refineries that spends a larger amount of money than its net income on dividend payments. In comparison, GS Caltex's dividend payments equaled about 20 percent of its net income.
Union officials are critical of Saudi Aramco, which controls 35 percent of S-Oil, claiming that the Saudi Arabian owners have only been interested in getting paid but are reluctant to increase investment.
Aramco took about 203.7 billion won and 533.7 billion won in dividends in 2006 and 2007, respectively. Frustration arose after the owners postponed the construction of a manufacturing facility in South Chungcheong Province, after spending about 3.5 trillion won to purchase a site there.
thkim@koreatimes.co.kr
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