S-Oil's 'Shaheen Project,' Backed by KRW 9 Trillion Investment, to Begin Commercial Operations Early Next Year

Largest-Ever Investment in a Petrochemical Facility in South Korea

TC2C Technology to Be Applied on the World's Largest Scale

Sales Channels and Industrial Complex Restructuring Pose Challenges

S-Oil is preparing to begin commercial operations early next year at its Shaheen Project, a petrochemical production facility in which it has invested more than KRW 9 trillion. The company plans to lower production costs using crude oil conversion technology and secure sales channels at home and abroad. However, concerns have been raised that the project could add to the burden on existing producers amid a domestic petrochemical industry restructuring driven by oversupply.

A view of S-Oil's Onsan plant in Ulsan. S-Oil

According to industry sources on October 14, S-Oil is preparing to conduct trial operations at the Shaheen Project, currently under construction at the Onsan National Industrial Complex in Ulsan. After inspecting each process, the company plans to begin trial operations in the fourth quarter of this year and start commercial operations early next year.

The Shaheen Project, which has received a total investment of KRW 9.258 trillion, is the largest petrochemical facility investment project in South Korea. It can produce 1.8 million tons of ethylene and 770,000 tons of propylene annually. A substantial portion of the ethylene will be consumed in-house to produce up to 1.32 million tons of polyethylene (PE) per year. The company plans to raise its operating rate to its maximum production capacity during next year.

Cost competitiveness is key. Thermal Crude to Chemicals (TC2C) technology, developed by S-Oil's parent company Saudi Aramco, will be used commercially for the first time in the world. The technology converts crude oil and low-value-added oil fractions from refining processes into petrochemical feedstocks. The company says it can lower procurement costs by using a wider range of feedstocks than conventional naphtha cracking centers (NCCs), which primarily use naphtha.

The project will also use its own power generation facilities and waste heat recovery technology. In a report published in September 2025, Yuanta Securities estimated that Shaheen's ethylene break-even point, excluding feedstock costs, was $171 per ton. That is $79 lower than the $250 per ton for existing domestic NCC operators. The estimate reflects savings in electricity and labor costs, among other factors.

S-Oil is also working to secure sales channels. In February, it signed a five-year PE export marketing contract worth approximately KRW 5.5 trillion with Saudi Aramco affiliate SABIC. The strategy is to establish a foundation for overseas sales by leveraging SABIC's global sales network.

In South Korea, S-Oil has completed installation of a pipeline network to supply basic petrochemical feedstocks to downstream processors in the Ulsan-Onsan area. It is providing product samples and pursuing supply contracts. Pipeline deliveries can reduce the risk of supply disruptions and transportation costs compared with shipping. S-Oil plans to allocate roughly half of its sales to the domestic market and half to exports, adjusting the split according to market conditions.

However, competition with existing producers is expected to intensify. In response to oversupply from China, the government and industry are pursuing a restructuring plan to reduce domestic ethylene production capacity by 2.7 million to 3.7 million tons per year. The planned cuts at the Daesan and Yeosu industrial complexes total 2.49 million tons, but the Shaheen Project will add 1.8 million tons of annual production capacity once operational. Even if a substantial portion of the ethylene is consumed in-house, the addition of up to 1.32 million tons of PE production capacity could burden existing producers.

Restructuring at the Ulsan Industrial Complex is another variable. S-Oil, SK Geo Centric and Korea Petrochemical Ind. have yet to narrow their differences over the scale and targets of production cuts. S-Oil maintains that Shaheen, a new high-efficiency facility, should be excluded from the cuts, while some in the industry argue that placing the burden solely on existing producers would be inequitable. As S-Oil will also incur depreciation expenses after commercial operations begin, raising the operating rate early will be crucial to securing profitability.

This content was produced with the assistance of AI translation services.