In 1972, SK Energy built the first naphtha-cracking plant in the nation and helped lay the cornerstone for the nation's petrochemical industry. Since then, we have been a pioneer in the domestic petrochemicals industry, supplying materials required by virtually all industrial sectors ranging from state-of-the-art materials for cars, electronic or communication goods to paints, ballpoint pens, contact lenses, cosmetics and detergents. By continuing to put our priority on customers and on maintaining world-class cost and quality competitive edge, we will expand our markets both at home and abroad.

SK Energy produces the olefins ethylene and propylene as well as the intermediates
butadiene and butane-1. These basic petrochemicals are supplied as feedstock to downstream plants
inside the SK Ulsan Complex, as well as in the larger Ulsan Petrochemical Complex, thus playing a key
role in advancing the Korean petrochemical industry. Despite a rapidly changing global market in
2007, the Company supplied 980,000 tons of olefins and intermediates internally and an additional 1.1
million tons to outside petrochemical processors. Cost-cutting efforts and new technology
development will continue in 2008 to ensure that customers receive stable supplies of the high quality
petrochemical feedstock they require.

The aromatics segment is characterized by a free flow of imports and exports globally; and
domestic prices closely follow international prices. This business is undergoing accelerated change
around the world. Economic development in Southeast Asia has prompted the establishment of local
production and distribution channels in Thailand, Indonesia, Singapore and elsewhere. The improving
commercial environment in China is also generating new demand for aromatics. A supply glut in 2007
sparked intense price competition, yet SK Energy managed to sell 4.45 million tons of aromatics in
addition to supplying internal requirements. In 2008, the Company aims to strengthen its market
leadership. The operational efficiency of aromatics production processes will be raised further while
production costs continue to be lowered to deliver high quality products at the time they are needed.

SK Energy was Korea¡¯s first company to produce solvents; today, it is the nation¡¯s largest
performance chemical maker, selling 1.13 million tons in 2007. The Company has continued to develop
solvents that are safer in the workplace and friendlier to the environment. The product lineup now also
spans more than 90 different grades. SK Energy is currently leveraging its know-how and technical
expertise to establish joint ventures in China, Asia¡¯s largest solvent market; in the process, it is securing
a solid platform for local solvent production and marketing. Moreover, the Company is responding to
customer needs for product and applied technology support. Customer services will continue to be
upgraded by expanding the product line further, launching a new online marketing system, and
making regular visits to customers

The polymer business spans the production of linear low-density polyethylene, high-density
polyethylene and polypropylene. Combined sales amounted to 840,000 tons in 2007. New grades were
developed to improve competitiveness and make inroads into the value-added end of the polymer
business. Competitiveness in China, the world¡¯s largest polymer importer, was improved by reinforcing
the local marketing network. In 2008, new customer value will be created by offering information
online, and improving technical as well as financial support programs and customer services. Company
representatives will also visit customers regularly to maintain close contact.

SK Energy produces ethylene propylene diene monomer (EPDM), which features outstanding
resistance to weathering, heat and ozone. This value-added synthetic rubber is commonly used in the seals
for automotive doors, windows, trunks and hoods. The steady growth in sales of automotive and
industrial-use rubber parts is driving demand for performance rubber, and this prompted SK Energy to
upgrade and restart its idle EPDM plant in May 2006. The plant operation rate will be maximized and global
market opportunities will be exploited to boost both the sales and profitability of this business unit.