SAF exports emerge as new income source for struggling refiners

By Park Jae-hyuk

Competition is heating up among oil refiners in Korea to dominate the market for sustainable aviation fuel (SAF) exports, with expectations for improving their deteriorating profits by selling the alternative fuel made from nonpetroleum feedstock that reduces emissions from air transportation.

On Sunday, SK Energy and HD Hyundai Oilbank issued respective press releases regarding their track records of exporting SAF.

SK Energy said in its press release that it became the first Korean oil refiner to export SAF to the European market. The subsidiary of SK Innovation especially emphasized the fact that the European Union this year started requiring all flights from airports in its member countries to use fuel that contains at least 2 percent SAF.

"We succeeded in entering the world's largest SAF market earlier than our rivals," SK Energy said. "Our latest achievement can be attributed to the fact that we became the first Korean oil refiner to start the mass production of SAF."

HD Hyundai Oilbank, on the other hand, emphasized the fact that it became the first Korean oil refiner to start commercial sales of SAF last June, when it started supplying its eco-friendly fuel to Japan's All Nippon Airways via Marubeni, a Japanese trading firm.

"We exported a product that received ISCC EU certification," the HD Hyundai subsidiary said. "There are two types of certifications for the production of SAF — the ISCC EU and the ISCC CORSIA — but there is no difference in the quality of products that receive different certifications."

Oil refiners in Korea increased their investments in SAF last year amid worsening profitability caused by a decline in refining margins. Their rivalry in the SAF market is likely to become fiercer as Korea and other developed countries are set to obligate airlines to use the eco-friendly fuel.

S-Oil, which is building storage tanks and pipelines for biofuel in Ulsan, started producing co-processed SAF for Korean Air's flights connecting Incheon and Tokyo last August. Co-processing refers to a method of producing SAF at existing refineries.

Last September, the Saudi Aramco-owned oil refiner also signed a memorandum of understanding with T'way Air to supply SAF for the budget carrier's flights.

GS Caltex also provided Narita International Airport in Japan with SAF produced by Finland's Neste.

Although GS Group's oil refinery unit has yet to produce its own SAF, the company reiterated its plans to invest in facilities for the production of the eco-friendly fuel.

"After overcoming the difficult situation, we will proceed with our investments in SAF as planned," GS Caltex CEO Hur Sae-hong told reporters last July.

Last month, he maintained the stance, saying that the company is considering investments in the construction of SAF production facilities.