“The volume of lubricating base oil equivalent to 16 mountain-sized tanks is being sold out in just two weeks.”

On the 14th (local time), Lee Tae-hoon, plant manager of SK Enmove’s iLBOC plant, a subsidiary of SK Innovation located in Cartagena, Spain, made this comment. As crude oil and petroleum products from the Middle East face supply chain disruptions in the wake of the Iran war that broke out in February this year, SK Enmove is emerging as a key supplier to the European market. Lee said, “The plant lives up to its name iLBOC (which sounds like ‘good fortune’ in Korean),” adding, “We will use this opportunity as a chance for a quantum jump.”

● Value of iLBOC plant rises due to fallout from Middle East war

Lubricating base oil, a key raw material for automotive engine oil, has faced a worsening supply shortage since the outbreak of the Iran war in late February. In particular, when the large-scale Pearl GTL (gas-to-liquids) natural gas liquefaction facility in the Ras Laffan industrial complex in Qatar was attacked in March, lubricating base oil production facilities in the Middle East were damaged. It is expected to take about a year to fully restore operations. With the Strait of Hormuz under blockade, transportation of already produced products has also been disrupted, and supply shortages are expected to continue.

The Middle East is a core production region that accounts for more than 20–30% of the world’s supply of premium lubricating base oil, and the United States last year relied on the Middle East for 50% of its import volume. Due to the recent supply shortage, lubricating base oil prices have surged from USD 3.4 (about KRW 4,500) per gallon in January this year to USD 11.4 (about KRW 15,000) on 11 July.

As a result, the strategic value of the iLBOC plant has recently been drawing attention in the industry. The iLBOC plant is a joint venture in which SK Enmove holds a 70% stake and Repsol, Spain’s largest energy company, holds 30%. It began operations in 2014 and, after expansion in 2023, can produce 19,300 barrels of lubricating base oil per day.

First unveiled to the media on the 14th, the iLBOC plant looked like a giant island of pipes. Pipes of various sizes were intricately intertwined, reminiscent of a massive labyrinth. Heavy, dull mechanical operating sounds continued nonstop while touring the facilities. In accordance with strict safety rules, the entry of electronic devices such as mobile phones was prohibited to prevent explosion risks. An official at the iLBOC plant said, “We transplanted the Ulsan plant in Korea here as it is. The plant is so stabilized that only two Koreans are needed to operate this large facility.”

● Operating profit expected to hit a record high in Q3 this year

After succeeding in mass production and commercialization of lubricating base oil in Ulsan in 1995, SK Enmove established production bases in Cartagena, Spain, and Indonesia. The iLBOC plant receives high-quality unconverted residue and other feedstock from Repsol’s Cartagena refinery complex via pipeline. Applying SK Enmove’s catalyst technology, it produces premium lubricating base oil. SK Enmove stated, “As the Iran war has aggravated supply shortages, inquiries from European customers are pouring in,” adding, “Our 30 years of accumulated formulation data, customer-tailored technology, and stable supply capability based on regional production bases are now bearing fruit.”

In fact, boosted by rising lubricating base oil margins and expanded sales due to production disruptions at Middle Eastern competitors, SK Enmove’s operating profit in the second quarter of this year (April–June) surged to KRW 691.9 billion, up 414.4% year-on-year and 267.1% quarter-on-quarter. Securities industry projections indicate that operating profit in the third quarter of this year (July–September) will reach an all-time high of about KRW 1 trillion. Moon Pil-gyu, head of SK Enmove’s European subsidiary, said, “Lubricating base oil contracts are long-term and not easily changed, and countries are now moving to secure stable supplies of lubricating base oil,” expressing expectations for mid- to long-term growth.

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