The Seoul-based airline said Friday it publicly submitted an indication of interest in taking over a 28.4 per cent stake in the nation's third-largest refinery.

"The company is interested in buying the treasury stocks, which we think would bring us synergies," said a company official who declined to be identified.

Aramco Overseas Company B.V., the largest shareholder of S-Oil and a subsidiary of Saudi Aramco, has been in talks with several local firms to sell its treasury stocks.

Experts expect the acquisition to help improve the bottom lines of Hanjin Group, which has Korean Air and the nation's biggest freighter Hanjin Shipping Co. under its wing.

S-Oil currently supplies about 10 percent of jet fuel for Korean Air and over 7 per cent of vessel fuel for Hanjin Shipping.

The stakes in the oil company would help the transporters to secure a more stable and cost-efficient energy supply, which assumes about 30 per cent of total costs.

Industry watchers also believe that the stock sale would help S-Oil with its 3.5 trillion won (US$3.7 billion) investment in new refining facilities and finance a redemption of 800 billion won debt.

The company is set to build a 480,000 barrel-per-day crude distillation unit by 2010 in Seosan, South Chungcheong Province.

The mammoth project would raise its total capacity by almost 70 per cent to 1.06 million barrels per day, outstripping the 650,000 barrels of the nation's No. 2 GS Caltex Corp.

"The stock sale could reduce debt burdens from the investment project," said Cha Hong-sun, an analyst at GoodMorning Shinhan Securities Co.