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| A hydrogen gas refilling station in Suwon, Gyeonggi Province / Korea Times file |
South Korean refiners are jacking up investment in the burgeoning hydrogen market to secure their place in a world shifting away from fossil fuels, and to get ahead of the next big change in the energy industry.
Hydrogen, which burns clean when mixed with oxygen in a fuel cell, can be used to power various industries, vehicles and ships, but it has been mostly used in oil refining and for the production of fertilizers.
Large-scale use of hydrogen requires not only production, but also compression, transportation, distribution and conversion facilities, which gives petrochemical companies a competitive edge in building a value chain.
As major countries raise their carbon emission targets and investors get serious about sustainability, major refiners in Asia's fourth-largest economy have been stepping up their investment in hydrogen to capture a slice of this growing energy market.
Top refiner SK Innovation is well positioned to take the lead in the hydrogen industry, as its petrochemical and gas subsidiaries can utilize their existing infrastructure under their parent SK Group, the nation's third-largest conglomerate.
Under the group's net-zero emission goal by 2050, its holding firm SK has vowed to invest 18.5 trillion won ($16.5 billion) into building hydrogen production facilities and refilling stations by 2025.
"Hydrogen is an eco-friendly energy source suited for the domestic environment as it is not affected by climate and requires less space for production," SK Group Chairman Chey Tae-won said in announcing the investment plan in March.
As a first stage, SK ES and SK Incheon Petrochem will join hands to build a liquid hydrogen plant capable of producing 30,000 tons a year in the western port city of Incheon by 2023.
SK ES will process byproduct 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 home turf, SK acquired 9.9 percent of U.S. fuel cell company Plug Power for $1.6 billion in January, and made another strategic investment in Monolith Materials, another American company known for its clean hydrogen production technology, earlier this month. The company did not reveal the amount it invested.
GS Caltex, a joint venture between GS Energy and U.S. oil producer Chevron, is also tapping into the liquid hydrogen business in partnership with the state-run Korea Gas (KOGAS).
GS Caltex and KOGAS plan to build a liquid hydrogen facility with an annual capacity of 10,000 tons on idle land at 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 filling stations around Seoul and other selected regions in time for the completion of the plant in 2024.
"By combining GS Caltex's experience in running gas and charging stations and the experience of KOGAS in the LNG business, the two companies will create synergy in the hydrogen business," GS Caltex CEO Hur Sae-hong said in a press release.
In April, Hyundai Oilbank signed a memorandum of understanding with U.S. hydrogen giant Air Products Chemicals to use the gas industry leader's technology to produce hydrogen from its crude oil byproducts and natural gas.
Hyundai Oilbank has set the goal of producing 100,000 tons of "blue" hydrogen by 2025, using carbon capture and storage technology to cut CO2 emissions.
Blue hydrogen is produced from natural gas and produces less CO2 than grey hydrogen which is produced when the element is stripped out of fossil fuels. Green hydrogen is the cleanest variety as it uses renewable energy to produce hydrogen from water.
"The company aims to reduce its reliance on refining to 40 percent of total revenue by 2030 from the current 85 percent," Hyundai Oilbank CEO Kang Dal-ho said. "We'll become a leading green energy platform that earns nearly 70 percent of our operating profit from the blue hydrogen, white bio, and eco-friendly chemicals and materials businesses."
S-Oil, the nation's No. 3 refiner owned by Saudi Aramco, has been focusing on fuel cell systems, which use chemical reactions to produce electricity from hydrogen.
In March, S-Oil acquired a 20 percent 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 by 2027 to build up an annual production capacity of over 100 megawatts.
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| A hydrogen-powered bus / Korea Times file |
The refiners are not alone in believing hydrogen has the potential to become the clean energy fuel of the future.
The government has been promoting hydrogen as a growth driver 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 fueling stations nationwide as of June, and the government plans to increase the number to 180 by the end of the year.
The hydrogen stations are mainly used for fueling Hyundai Motor's NEXO, the only commercial fuel cell vehicle available here at the moment.
Market watchers say that industry players will have to explore ways to drive down the expensive price of hydrogen in the early stages, and gradually increase the ratio of green hydrogen to make the fuel a clean alternative.
Currently, hydrogen is priced around 7,000 to 8,000 won per kilogram, while the government's hydrogen economy road map aims to lower the price to 6,000 won by 2022 and 4,000 won by 2030.
"For hydrogen to have competitiveness in terms of price, transportation costs, which account for 40 percent of wholesale prices, need to come down," Jun Hye-young, an analyst at KTB Investment Securities, said. "That's why local companies are focusing on liquid hydrogen, which can reduce logistics costs by more than 70 percent of compared to compressed gaseous hydrogen." (Yonhap)
