February 02, 2024 [S&P Global]- South Korean oil refiners will shift their business priority to biofuels in 2024 and environmentally-friendly products will be considered the new growth engines as oil product cracking margins may not hold up in the long term, refinery sources said Jan. 30-31.
“The country’s four major oil refiners plan to invest a combined Won 6 trillion ($4.5 billion) over the next seven years through 2030 to brace for global environmental regulations and create new growth engines,” an official at the Ministry of Trade, Industry and Energy said.
The investment would be mainly focused on environment-friendly biofuels, such as biodiesel, sustainable aviation fuel, and waste plastic pyrolysis oil, among others, he added.
“The government will provide necessary support for refiners as a new law has been enacted to ease regulations on biofuel production,” the official said, referring to amendments to the Petroleum and Alternative Fuels Business Act approved by the National Assembly earlier this month.
Under the revised law, local refiners no longer need to get government approvals for co-processing as biofuels feedstocks, which makes it easier to produce biofuels by allowing for the use of waste plastic pyrolysis oil, waste lubricants and biomass in the refining process.
The law allows the input of “eco-friendly refining raw materials” designated by MOTIE as an oil refining process and help establish a stable supply chain of environmentally-friendly fuels.
“The new rules would help meet domestic demand of biofuels and achieve the country’s goal of reducing carbon emissions,” the MOTIE official said.
On the back of eased rules and bigger governmental support, South Korea’s third-biggest refiner S-Oil Corp. started using cooking oil, vegetable oil and waste plastic pyrolysis oil in its crude oil refining process Jan. 29.
“Through the co-processing, we plan to produce sustainable aviation fuel, biodiesel and eco-friendly petrochemical feedstocks such as naphtha and polypropylene,” the refiner said in a statement.
“We will expand production of biofuels by adjusting the bio-materials mixing ratio,” it added, noting that S-Oil has become the first refiner in South Korea to start co-processing for production of biofuels.
“To spur our eco-friendly energy and chemical production businesses, we will keep discovering alternative materials to replace those with serious carbon footprints and brand our new products with the international sustainability and carbon certifications (ISCC),” the statement said.
S-Oil’s local rivals have also stepped up for biofuel projects. Top refiner SK Innovation aims to start SAF production at its main Ulsan complex in 2026.
SK Innovation plans to invest Won 5 trillion in the Ulsan complex by 2027 to transform its fossil fuel-focused process into a green energy-oriented one with a waste plastic recycling cluster which would reform 25,000 mt/year of used plastic.
The company aims to increase the ratio of eco-friendly business from 30% in 2022 to 70% by 2025 to reduce its carbon footprint and create new business opportunities.
GS Caltex, the second-biggest oil refiner, launched a set of biofuels projects with the country’s largest airline Korean Air and shipping company HMM Co.
The smallest refiner Hyundai Oilbank has built a 130,000 mt/year biodiesel plant in its refining complex in Daesan. The company aims to start production at the plant, which is undergoing test runs, as early as March.
Hyundai Oilbank plans to transform the biodiesel plant into a bigger facility that can produce 500,000 mt/year of hydrogenated vegetable oil by the end of this year.
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