South Korean oil refining company SK Innovation and energy affiliate SK E&S have agreed to merge their operations, forming an energy company with assets totalling Won100trn ($72.5bn).   

This move is said to position the combined entity as the largest private energy company in the Asia-Pacific region.  

It is a response to the external business environment including economic downturns, sector uncertainty and the electric vehicle market gap. 

In addition to external expansion, the merger seeks to create synergies in three main areas: improving portfolio competitiveness, bolstering financial and profit frameworks, and ensuring sustained growth momentum. 

SK Innovation, established in 1962, has grown from being South Korea's first oil refining company to a diversified entity in petrochemicals, lubricants, oil exploration and future energy sectors.  

SK E&S, which was spun off from SK Innovation in 1999, has become South Korea’s private liquified natural gas (LNG) company and is transitioning to a green portfolio. 

The combined portfolio of the merged company will cover a wide range of energy sources and solutions including ammonia, batteries, chemicals, city gas, hydrogen, immersion cooling, LNG, oil, power and renewable energy.  

Concurrently, SK On, a unit of SK Innovation, will merge with SK Trading International and SK Entercom to enhance raw material competitiveness and ensure business sustainability. 

SK Innovation CEO and president Park Sang-kyu said: “The merger of the two companies represents a structural and fundamental innovation aimed at achieving sustainable growth by proactively responding to the changing environment surrounding the energy industry. 

“Through this merger, SK Innovation will grow into a ‘Total Energy & Solution Company’ that leads Korea’s energy industry from the present into the future.” 

SK E&S CEO and president Choo Hyeong-wook said: “This merger will not only strengthen the existing business capabilities of both companies but also secure growth engines for key future energy businesses.  

“Based on the synergies created through the merger, SK E&S will enhance its green portfolio centered on its four core businesses and lead the future energy market.” 

Last week, Posco International completed Korea's first non-state-run LNG terminal, Gwangyang LNG Terminal 1, further expanding the country's LNG infrastructure.