S.Korean Refiners Post Record H1 Losses

Two refiners in South Korea, the world's fifth largest crude oil importer, posted their biggest losses ever in the first half when oil prices slumped as the COVID-19 pandemic ravaged fuel demand.

SK Innovation Co Ltd, owner of South Korea's top refiner SK Energy, reported on Wednesday a second-quarter operating loss of 440 billion won ($367 million), taking its first-half losses to 2.2 trillion won. A year earlier, it posted an operating profit of 494 billion won in the second quarter.

"We saw the worst oil price in the first half of this year hit by the pandemic and we had to purposely lower our capacity because the pandemic sapped oil demand," an SK Innovation official told Reuters, asking not to be named.

Oil prices fell in April to their lowest since 1999 after top producers increased production and global lockdowns decimated fuel demand.

South Korea's third largest refiner by capacity S-Oil Corp also recorded its biggest first-half loss at 1.2 trillion won.

SK Innovation, which has refining capacity of 1.115 million barrels per day (bpd) at plants in Ulsan and Incheon, said it operated the facilities at 77% of capacity on average in the April-June period, versus 88% a year earlier.

Kim Jang-woo, the head of SK Innovation's Finance 3 Office, told analysts the company planned to shut its No.3 crude distillation unit (CDU) at its Ulsan plant in the second half of the year.

The company did not provide details on the duration of scheduled maintenance and its impact.

The lower run rates in the second quarter came as SK Energy shut down its 260,000 bpd No.5 CDU at Ulsan for scheduled maintenance in May and June.

A relaxation of lockdown measures in recent weeks has boosted refining margins, but any fuel demand recovery is uneven as a resurgence in the novel coronavirus cases threatens to trigger new restrictions.

SK Innovation's shares closed down 1.5%, while the broader market KOSPI rose 0.3%.

($1 = 1,192.6400 won)

(Reporting by Heekyong Yang and Joyce Lee; Writing by Florence Tan; Editing by Kenneth Maxwell, Himani Sarkar and Barbara Lewis)