Korean refiners turn to hydrogen in search of next “oil”


South Korean refiners are investing in the burgeoning hydrogen market to secure their place in a world moving away from fossil fuels and to anticipate the next big change in the energy industry.

Hydrogen, which burns cleanly when mixed with oxygen in a fuel cell, can be used for a variety of industrial purposes, vehicles and ships, but it has been primarily used in petroleum refining and the production of ‘fertilizer.

The large-scale use of hydrogen requires not only manufacturing plants, but also compression, transportation, distribution and conversion facilities, giving petrochemical companies a competitive advantage in building the supply chain. hydrogen value.

As major economies tighten carbon emissions targets and investors take sustainability seriously, major refiners in Asia’s fourth-largest economy have stepped up investments in hydrogen to capture a share of the booming energy market. growth.

Leading refiner SK Innovation is well positioned to take the lead in the hydrogen industry, as its petrochemical and gas subsidiaries can use their existing infrastructure and unite under their parent company SK Group, the country’s third largest conglomerate .

As part of the group’s goal of net zero emissions by 2050, its holding company SK Inc. has pledged 18.5 trillion won ($ 16.5 billion) by 2025 in construction hydrogen production facilities and refueling stations.

“Hydrogen is an environmentally friendly energy source suitable for the domestic environment as it is unaffected by the climate and requires less space for production,” said the chairman of the SK group, Chey Tae-won, when the investment plan was announced in March.

As a first step, SK E&S and SK Incheon Petrochem will join forces to build a liquid hydrogen plant capable of producing 30,000 tonnes per year in the western port city of Incheon by 2023.

SK E&S will refine the by-product hydrogen from SK Incheon Petrochem’s plant to produce liquid hydrogen, which will be supplied to the Seoul metropolitan area.

As part of plans to go beyond its territory, SK in January acquired 9.9% of US fuel cell company Plug Power for $ 1.6 billion, and made another strategic investment in Monolith Materials Inc., an American company known for its clean hydrogen production technology. , earlier this month. The company did not disclose the amount of the investment.

GS Caltex Corp., a joint venture between GS Energy Co. and US oil producer Chevron, operates the liquid hydrogen business in partnership with state-owned Korea Gas Corp. (KOGAS).

GS Caltex and KOGAS plan to build a liquid hydrogen plant with an annual capacity of 10,000 tonnes on unused land in a KOGAS LNG terminal, which will be enough to power around 80,000 fuel cell cars per year.

The two companies also agreed to build hydrogen refueling stations around Seoul and other selected regions in time for the plant’s completion in 2024.

“By combining the experience of GS Caltex in operating gas and charging stations and the experience of KOGAS in the LNG sector, the two companies will create a synergy in the hydrogen sector,” said the GS Caltex CEO Hur Sae-hong, in a statement.

In April, Hyundai Oilbank Corp. signed a memorandum of understanding with US hydrogen giant Air Products & Chemicals to use technology from the gas industry leader to produce hydrogen from its crude oil and natural gas by-products .

Hyundai Oilbank has set a target of producing 100,000 tonnes of “blue” hydrogen by 2025, using carbon capture and storage technology to reduce CO2 emissions.

Gray hydrogen is produced when the element is removed from fossil fuels, while blue hydrogen is produced from natural gas and produces less CO2. Green hydrogen is the cleaner variety because it uses renewable energy to produce hydrogen from water.

“The company aims to reduce its reliance on refining activities to 40% of total revenue by 2030, from 85% currently,” said Kang Dal-ho, CEO of Hyundai Oilbank. “We will become a leading green energy platform that derives nearly 70% of operating profit from the blue hydrogen, white bio, and environmentally friendly chemicals and materials businesses. “

S-Oil Corp., the country’s No.3 refiner owned by Saudi Aramco, has focused on the fuel cell system, which converts chemical energy stored by hydrogen into electricity.

In March, S-Oil acquired a 20% stake in Fuel Cell Innovations (FCI), a joint venture between Korea and Saudi Arabia, for 8.2 billion won, saying it will invest up to 100 billion won. of won by 2027 to have more than 100 megawatts of power. annual production capacity.

Refiners aren’t the only ones who believe that hydrogen has the potential to become a clean energy fuel in the future.

The government promoted hydrogen as one of the growth engines in the green energy sector and implemented the world’s first hydrogen law in February to boost related industries and expand infrastructure.

There are 94 hydrogen filling stations in the country as of June, and the government plans to increase the number to 180 by the end of the year.

The hydrogen stations are primarily used to power Hyundai Motor’s NEXO, the only commercial fuel cell vehicle available in the country.

Market watchers say industry players will need to explore ways to bring down high hydrogen prices at an early stage and gradually increase the ratio of green hydrogen to make fuel a clean alternative.

Currently, the price of hydrogen is around 7,000 to 8,000 won per kilogram, and the government’s hydrogen economy roadmap aims to lower the price to 6,000 won by 2022 and to 4,000 won by 2030.

“For hydrogen to be price competitive, transportation costs, which are 40% of the wholesale price, must come down,” said Jun Hye-young, analyst at KTB Investment & Securities. “This is why local businesses are focusing on liquid hydrogen, which can save more than 70% in logistics costs compared to compressed gaseous hydrogen.”

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