South Korean's largest energy company, SK Energy, intends to tap into the mainland's vibrant oil market in the coming years.

SK Energy (China) Manager of Planning and Finance Jin Woo-jin spoke about the plans with China Daily, saying his company hopes to increase its exposure in the market by collaborating with leading partners.

SK Energy vows to enhance its market presence by forming joint ventures with mainland oil companies. Bloomberg

The company earlier entered into an agreement with Sinopec to develop an ethylene cracker project in Wuhan, in Central China's Hubei province.

Sinopec holds a 65 percent stake in the project, and SK Energy owns the rest.

"The joint venture (JV) is scheduled to be operational in 2014," Jin said.

He didn't reveal the total cost of the project, but it has been reported that the South Korean party will pay out 1 trillion Korean Won (KRW), or approximately HK$7 billion.

The Wuhan project will produce an estimated 800,000 tons of ethylene cracker per year.

"The Wuhan project will be our second mainland project, after the 50-50 solvent JV with Shanghai GaoQiao Petrochemical Corporation (SGPC), a subsidiary of Sinopec."

The Shanghai JV has operated with a production capacity of 60,000 tons of solvent per year.

Aside from that, Jin said the company is in talks with a leading player to develop a new refinery project in Liaoning.

However, he declined to name the company or the size of the investment, saying the deal is still in its preliminary stage.

Looking ahead, Jin said the company will strive to step up its investment on the mainland on the hopes of establishing a value chain from upstream to downstream oil businesses in the long run.

In return, he said SK Energy wants to partner with mainland peers in order to better venture into the overseas energy market.

When asked about the extent to which the company's profits are being squeezed by rising oil prices, Jin said many refiners recorded negative profit margins earlier this year.

"The international oil prices went through the roof due to speculation, but the (oil) production could not rise as much," he said.

But he said oil manipulation isn't rampant among South Korean companies, mainly because petroleum-product prices are set to the international standard.

In the first three months this year, the company's operating profits decreased by 16.2 percent, year-on-year, to 399.1 billion KRW (HK$2.79 billion) because of the oil hike.

And its net profits dropped 62 percent, to 133 billion KRW (HK$931 million), as a result of the unfavorable fluctuation in the exchange rate.

"We're expecting a recovery in the refining margin in the second quarter while we plan to improve the margin by establishing advanced and high-value-added facilities," Jin said.

(HK Edition 06/10/2008 page2)