▲ Cho Kyong-mok, CEO of SK Energy

Q1. You appear to have very tight schedule including participation in the New Year’s meeting of the leaders in the energy industry from the beginning of the year. What was the foremost issue at the meeting?

New Year’s meeting is held for the continuous growth and cooperation of the energy industry with the participation of the relevant industries, institutions and government. The foremost issue at this year’s meeting was ‘energy conversion’. Conversion to Clean & Reliable energies is essential for sustainable growth. Environment-friendly technology development, etc. is not only the demand of our current era but also our standard that we must pursue. Therefore, we believe the innovation of business portfolio that is suitable for such task is an unavoidable task that we must execute.

Q2. Your statement about ‘Company that opens the cleaner and more convenient future’ seems to be in line with what you mentioned in the New Year’s message of SK Energy CEO. How would you describe the Company that opens the cleaner and more convenient future that SK Energy is pursuing?

Restructuring of the business into environment-friendly oriented business is the path that we need to pursue preemptively ahead of others. It is because securing of the sustainable future is difficult without considerations for the environment.

SK Energy will ceaselessly pursue innovation of our business portfolios with focus on the Platform and Green domain. We will continue with our efforts to provide Platform that can be used conveniently anywhere and anytime to the clients and to eliminate environmental pollutants through ‘Clean CLX*’ project, etc. In addition, we will continuously pursue expansion of Green Portfolio through new business model development by utilizing new technologies in the environmental area including environment-friendly Bio-Fuel development that drastically reduced the carbon emission, and CO2 reduction and water treatment, etc. We will be endeavoring to achieve the happiness of our clients and sustainable growth of SK Energy by resolving the environmental issues in our society through such efforts.

(*) Clean CLX: a social value creation activity of SK Ulsan Complex to establish cleaner and blissful society, executed in 4 domains, namely, Clean Air, Clean Water, Clean Workplace and Clean Life. SK Ulsan Complex is leading resolution of the environment issues and continuous creation of social values through this activity.

Q3. I would like to ask another environment-friendliness related question. SK Energy commenced construction of VRDS within the SK Ulsan Complex under the strategy of Green Innovation in 2017 and is scheduled to operate it commercially in the 1st quarter this year. Could you explain the values that VRDS will create?

We decided to invest in VRDS, which is a desulfurization facility for decompression residual petroleum in order to preemptively cope with the forthcoming changes in the business structure by the implementation of IMO 2020, an environmental regulation on offshore petroleum, and to utilize it as an opportunity for further growth. VRDS is capable of producing a total of 40,000 barrels of low-sulfur oil including 0.5% low-sulfur intermediate crude and maritime diesel a day by using high-sulfur intermediate crude, thereby making it the most effective facility to cope with the implementation of IMO 2020. SK Energy is anticipating generation of additional profits of 200~300 million Won per annum through this facility. Commercial operation of VRDS will not only increase the innate economic value of the business but also creates diversified social values including production of environment-friendly fuel with the sulfur contents drastically lowered to less than 0.5% and employment opportunities for the construction and operation of the facility, etc.

One of the management issues that the entire subsidiary companies of SK Innovation are pursuing is innovation of BM through environment-friendliness centered social value and maximization of the happiness of the clients through such innovation. SK Energy is currently creating cases that exemplarily reflect such management issues by leading the relevant industry.

▲ Construction site of VRDS within SK Ulsan Complex

Q4. It is said that the global oil industry has reached a major transformation. In particular, difficulties in the petroleum industry continued to deepen since the end of 2018. How is SK Energy overcoming them?

In preparation of the possibility of further aggravation of the recent circumstances for the petroleum industry, we are examining the overall aspects of our businesses from the perspective of the Sense of Urgency. We firmly believe that the current difficulties will nurture robust organizational structure for SK Energy that can overcome the crisis confronted in the world under the laws of jungle. I believe there is establishment of sufficient consensus among the management including me and the constituent members of the company.

In order to turn the current crisis into an opportunity, we are continuously pursuing innovation of Biz Model from 2 perspectives. First, we will be fortifying the competitiveness of our existing business activities through improvement of the margin and innovation of the internal consumption marketing structure of SK Ulsan Complex, and generate stable financial performances in 2020 on the foundation of such fortification. Second, we are concurrently securing future growth portfolio. In addition to the total growth directions of Green, Platform and Global, we are currently search new business activities that will continue on with future of energy within the domains of Social Value (SV) and Digital Transformation (DT). For this purpose, we composed Happy Design Valley (SK Energy C-Level Design Team) with participation of appropriate leaders in each of the areas including me and currently executing corresponding tasks.

Q5. Earlier, you emphasized the innovation of business portfolio in order to secure the future growth engine. Please also tell us about the direction of such innovation?

Last year, SK Energy executed a new platform BM in earnest. We are putting in our utmost and diversified efforts to enable platform BM that we are currently pursuing such as ‘Homepick’, which is a shared infrastructure business model for gas stations, to be competitive and be equipped with the foundation on which to become a representative growing business of the company. At the same time, we will continue to develop new business items that will enable our clients and interested parties to enjoy more convenient and useful value of life through Local Delivery Platform and Car Care Platform, etc. that SK Energy provides.

▲ ‘Homepick’, shared infrastructure business model for gas stations, of SK Energy

We are planning to fortify the competitiveness of the existing businesses and to continuously develop and assertively utilize Artificial Intelligence (AI) and DT related technologies in order to further accelerate the development of new business models in the petroleum business area. We are planning to seek further reduction in cost to strengthen the competitiveness of the existing businesses by utilizing DT technology, and pursue innovation of business model in the direction of resolving the needs and pain points of the clients and providing new values at the same time. Such strengthening of the competitiveness of the existing businesses and innovation of the business portfolio will be executed not only in the direction of simply increasing the economic values (EV) but also in the direction of maximizing the Double Bottom Line (DBL) by considering even the social values (SV). SK Energy shall maximize the ‘happiness of the constituent members and interested parties’ by coping with the changes in the management environment and achieving continuous growth through such efforts.

Q6. The ‘happiness of the constituent members and stake holders’ you mentioned appears to be in alignment with the objective function of SK Group. What are your focal points for the practice of happiness management?

Although changing the standards for the management of the company to happiness may appear to be a highly challenging goal, I believe it can be achieved if all the constituent members were to put their utmost efforts and ideas together.

I, as the CEO, will take initiatives and lead the activities aimed at the rebirth of the company as a company that realizes ‘pursuit of happiness of the constituent members’. The leaders of SK Energy including me will lead the establishment of the environment for voluntary and subjective participation in happiness commitment by practicing happiness management as the principals of the changes. For this purpose, we are planning to upgrade the happiness strategy in the format led by the constituent members and pursue more extensive communication and brainstorming with the constituent members for improvement of the management processes, etc. in order to fortify our enforcement capabilities.

Q7. We heard that you volunteered as the 1st pledger for the Happiness Commitment of SK Energy. What commitments did you make?

Happiness Commitment is the first stage of the journey from the money-centered world to happiness-centered world. At the end of last year, all the 36 executives of SK Energy including me made commitment for happiness management.

I, with all the constituent members, made commitment for happiness challenge for 70 push-ups and sit-ups to demonstrate our firm resolution for the conversion from money-centered world to happiness-centered world, and successfully completed the challenge. All the executives, beginning with me, took up the happiness challenge to achieve the number of 2,520, which is the total number of the employees at SK Energy in order to fortify our volition to lead the pursuit of happiness through the challenge.

Q8. Lastly, is there any message you wish to convey to the constituent members and stakeholders?

It would never be overstated no matter how frequently we emphasize the importance of ‘innovation’ in ‘management’. Innovation is the essential factor in the survival of SK Energy as the motive force to cope with diversified crisis and to sustain the growth.

In order to cope with the forthcoming new waves, innovation at the level of demonstrating assertive and preemptive leadership is necessary, rather than followership that previously had been the optimal means of coping with crisis.

Until now, SK Energy has been establishing the ecosystem for the pursuit of innovation and will be materializing the strategies and generating performances in accordance with innovation in earnest this year.

Uncertainties in the management environment surrounding the domestic and overseas petroleum market are increasing substantially. However, I have firm conviction that the potentials of our constituent members will utilize the current crisis circumstances to convert our businesses into more robust and tenacious businesses.

There will be many things that we have not experienced in the past in the waves of changes that are already and will be upon us. I would like to emphasize once again that SK Energy will continue to establish and secure the foundation on which to generate stable financial performances regardless of any and all types of waves of changes.

Please look forward to the changes in SK Energy and performances that our constituent members will achieve. As such, we seek your continued encouragement and support.