Korean refiners face bigger dent in H2 bottom line as govt refuses to extend tax relief

South Korean refiners cannot expect improvement in the second-half bottom line after the government decided not to defer their tax dues longer even as they struggle with record losses from sluggish fuel demand and prices amid ongoing pandemic crisis.

The refiners were denied of their request for further deferment in their tax dues for petroleum imports and sale. Refiners are taxed about 300 billion won ($253.6 million) monthly for their imports of crude oil, or 1.2 trillion won from April to August based on last year’s figures. The dues for April-June imports this year were deferred for 90 days.

Korean oil refiners recorded the biggest loss in the January-March quarter this year in the face of multiple whammies – from the global demand slowdown due to the COVID-19 crisis to international oil price plunge and the deterioration in the refining margin. The Korean major refiners’ combined losses reached 5.1 trillion won in the first half.

The tax payment would further hurt their bottom line.

Fuel demand remains weak at home with the resurgence in virus infections since mid-August. The refining margin, a benchmark of profitability for crude refiners, hovers at $0.3 per barrel this week, far off the break-even point of $4 set by local refiners.

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