South Korean refiner S-Oil kicks off Shaheen project with world's biggest naphtha-fed steam cracker

South Korean oil refiner S-Oil Corp. launched its large-scale Shaheen refinery-integrated petrochemical plant project March 9, with construction of the world's biggest naphtha-fed steam cracker with the capacity to produce 1.8 million mt/year of ethylene expected to be completed by 2026.

S-Oil held a ground-breaking launch ceremony March 9 for the country's biggest ever petrochemical project. South Korea's third largest refiner plans to start commercial operations at the petrochemical plant in 2026, which will produce up to 3.2 million mt/year of basic petrochemical feedstocks such as ethylene, propylene, butadiene and benzene from naphtha and off-gas, the company said in a statement.

Shaheen is named after the Arabic word for falcon, Saudi Arabia's national bird, as it is funded by Aramco Overseas, a subsidiary of Saudi Aramco, which holds a 63.4% stake in S-Oil.

The Won 9.26 trillion ($7 billion) project was finalized during South Korean President Yoon Suk-yeol's meeting with Saudi Crown Prince Mohammed bin Salman in Seoul last November and is Saudi Aramco's biggest investment in South Korea.

The plant will also house a "TC2C facility" that converts crude directly into petrochemical feedstocks such as LPG and naphtha, a polymer facility that produces high value petrochemical feedstocks for plastics and other synthetic resins, and other facilities including storage tanks.

"The giant petrochemical plant will help S-Oil diversify its business portfolio from 'crude to chemicals' for innovative growth," S-Oil said in a statement. "The project will raise S-Oil's petrochemical portion to 25% by 2030 from the current level of 12%, playing a pivotal role in diversifying its fuel-weighted business."

Shaheen reflects S-Oil's ambitious plan to solidify its position as a clean energy and petrochemicals company that supports broader carbon neutrality ambitions, a company official said.

The Shaheen project is S-Oil's second-phase investment in petrochemical expansion after it spent Won 4.8 trillion in 2018 on a facility expansion to produce propylene, propylene oxide and polypropylene by reprocessing low-value residue oil, like heavy fuel from crude oil refining, which means its total investment is Won 14 trillion.

S-Oil runs three CDUs, No. 1 with 90,000 b/d, No. 2 with 240,000 b/d and No. 3 with 250,000 b/d and a condensate fractionation unit with a capacity of 89,000 b/d, which makes its total refining capacity 669,000 b/d.

The refiner also runs two RFCCs, No. 1 with 73,000 b/d and No. 2 with 76,000 b/d, at its Onsan complex.

S-Oil's new mega facility would likely lift South Korea's demand for primary petrochemical feedstock naphtha to around 470 million-480 million barrels/year, according to light distillate traders and industry analysts based in Seoul.

South Korea consumed 447.6 million barrels of naphtha in 2022 and 451.8 million barrels in 2021, data from state-run Korea National Oil Corp. showed.

Economic, diplomatic ties

Yoon in a speech at the ceremony at S-Oil's complex in Onsan said the project was a key achievement of economic diplomacy between South Korea and Saudi Arabia.

"The Shaheen project will help boost job creation and the local economy, while further strengthening cooperation between South Korea and Saudi Arabia," Yoon said.

Ahead of the ceremony, Yoon met with Amin Nasser, president and CEO of Saudi Aramco.

The South Korean government has been stepping up efforts in recent months to strengthen diplomatic and economic ties with major Middle Eastern crude producers to further enhance its energy security and help improve Persian Gulf sour crude import economics.

Senior officials at key South Korean government ministries including the Ministry of Trade, Industry and Energy, and the Ministry of Economy and Finance visited Riyadh in February to resume FTA negotiations with representatives from GCC member nations, marking the seventh round of official FTA discussions between the two parties.

As South Korean refiners have little to no interest in sanctioned Russian crude oil, the world's fourth biggest crude importer will inevitably rely more heavily on Middle Eastern crude producers, especially Saudi Arabia, S&P Global Commodity Insights reported previously, citing feedstock managers at major refiners in Seoul, Ulsan, Yeosu and Incheon.

South Korea imported 339.57 million barrels of crude oil from Saudi Arabia in 2022, up 21% from 2021, while its shipments of Russian crude tumbled 61% over the same period to 20.98 million barrels, KNOC data showed.