S-OIL is pushing ahead with the biggest project in its history, to construct the most advanced residue upgrading complex adopting state-of-the-art refining technologies and an olefin downstream complex utilizing cost competitive olefin feedstocks from the newly built residue upgrading complex. Upon its completion, the Residue Upgrading Complex will significantly enhance the Company’s profitability by converting heavy fuel oil, which has a value lower than crude oil and is expected to see a decline in market demand and profitability due to stricter environmental regulations, into high value-added gasoline and olefins. Also, it will enable S-OIL to have high level of cost competitiveness in the olefin downstream business by providing olefin feedstocks produced from the low value residue via cutting-edge technologies. The Olefin Downstream Complex, poised to be built together with the Residue Upgrading Complex, will bring unmatched competitiveness in the industry to the Company, through the technology partnership and comprehensive collaboration with a world’s leading petrochemical company as well as low cost olefin feedstocks. By construction of the Olefin Downstream Complex, S-OIL plans to make forays into the Polypropylene (PP) and Propylene Oxide (PO) businesses to extend its value chain to polypropylene and polyurethane areas. These new businesses will enable S-OIL to cope proactively with the industry trend of applying higher quality materials in the more value-added products used for information technology and biotechnology fields. Also S-OIL seeks to wean the domestic industry off the heavy reliance on imported materials like PO whose domestic supply is limited, thereby creating a stable income stream. This will allow Korean polyurethane industry as well as relevant industries to dramatically better their efficiency and competitiveness. S-OIL will build up a balanced business portfolio by manufacturing olefin downstream products that are likely to grow steadily in market demand at an annual rate of around 5%, outpacing the demand growth of petroleum products, in addition to its existing businesses, refining, lube and aromatics. S-OIL will consolidate its status as the most profitable total energy company that achieves stable operating outcomes in an ever- changing business environment.

To secure the competitiveness to guarantee a company’s sustainable growth, it is essential to enhance Technical Service (TS) capabilities needed for product development and technical assistance tailored to meet market needs. To this end, S-OIL signed a contract with the Seoul Metropolitan Office in 2014 to enter the R&D Complex in Magok District where it will construct the Fuel Oil/Lube Oil Engine Test Building for the existing fuel business and the Chemical TS Center for expanding TS activities in the olefin downstream business on a site spanning 29,100 square meters. In particular, given that in the olefin downstream business is the market-oriented business to meet diverse customer needs, the Chemical TS Center will lay the foundation for technical assistance for customers and development of core technology and product to ensure the Company successfully establishes the olefin downstream business. The role of the Chemical TS Center will be further reinforced with the expansion of the olefin downstream business and, in the long term, lead the exploration of new business opportunities and commercialization through competitive new technology. Also, we are promoting cooperation with technology licensors at home and abroad for TS capability enhancement while developing educational programs. To implement TS activities in a more efficient and practical manner, S-OIL is working to establish an organized technology task support system and technology support process. Besides, S-OIL has been in talks for concluding agreement on joint research with prestigious colleges since 2015, dedicating itself to nurturing talents and securing technology.

The SUPER project is being undertaken for the following three purposes: first, increasing the production capacity of high value-added diesel through revamping the existing residue upgrading complex; second, securing higher process volume and quality of aromatics and lube base oil through revamping production facilities; and third, reducing operating costs, raising energy efficiency, and improving process reliability based on long-term plans. Following the approval for investment by the Board of Directors in 2014, the SUPER project has been continuing in three phases (Package 1, 2, and 3) on the EPC contract basis in consideration of the project scale and implementation feasibility. The three phases will be completed by November 2015, November 2016, and May 2017, respectively. In 2015, S-OIL successfully completed the upgrade of the hydrocracking complex, resulting in increasing production volumes of high value-added diesel, kerosene, and lube base oil beyond the plan. The production volume of petrochemicals such as paraxylene also rose backed by the timely completion of the first stage of revamping the aromatic complex. In 2016, S-OIL plans to complete revamping of the lube base oil production complex, the RFCC complex, and the ultra low sulfur diesel production complex, followed by an upgrade of the aromatics production complex scheduled for 2017. Upon the completion of these projects, our competitive edge in main businesses will be further solidified. S-OIL will continue to develop, plan, and implement the next SUPER projects to revamp major production facilities and secure high profitability.