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04. May 2018

KOREA (SOUTH): ‘Oil majors’ presence in chemical industry to threaten Korean firms

South Korean chemical companies can be negatively affected by global oil majors’ entry into the chemical industry. As global oil majors enter the chemical industry one after another, South Korean companies are advised to shift the focus to higher value-added products to cope with the situation.

In a report released on 23 April 2018, the LG Economic Research Institute said that oil majors’ investment in the petrochemical industry can pose a threat to existing petrochemical companies in terms of material sourcing, business cycle and market position. Until recently, oil companies focused on oil exploration and development while maintaining a minimum participation in the chemical industry. This is not so any longer. Exxon Mobil, Saudi Aramco, and other global energy giants are investing in petrochemicals production facilities or securing equity stakes in chemical projects. Middle Eastern and Chinese oil companies are also increasingly combining the two sectors.

This is because investment in oil exploration and development is becoming less and less attractive. The global oil demand is also on the decline for reasons such as electric vehicle development. Oil companies also face increasingly tighter global environmental regulations. The LG Economic Research Institute mentioned that the trend can pose a threat to South Korean petrochemical companies. “Excessive investment can lead to a petrochemical material oversupply and the prices of raw materials such as naphtha can rise,” it said.

Source: Daily “Business Korea”, Seoul; 24 Apr 2018
(Syed Rashid Ali, Karachi, Pakistan)

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