Dual-fuel plant in Ulsan the bridge to future of SK gas

SK gas will pour about 2 trillion won ($1.5 billion) into shifting its focus from its previous LPG business to LNG and hydrogen until 2026, according to Yoon Byung-suk, SK gas CEO, on Wednesday.

A 406-megawatt steam turbine generator installed at SK gas' Ulsan GPS power plant is currently under construction. [SK GAS]

Ulsan - The grand shift away from fossil fuels won't happen overnight — and liquefied natural gas (LNG), the so-called “bridge fuel,” will fill the gap until the world’s carbon neutrality vision becomes a reality, says the CEO of SK gas.

That is where the liquefied petroleum gas (LPG) supplier is betting big.

SK gas will pour about 2 trillion won ($1.5 billion) into shifting its focus from its previous LPG business to LNG and hydrogen until 2026, according to Yoon Byung-suk, SK gas CEO, on Wednesday.

“Energy transition does not happen overnight — it takes decades for the change to take place, and that is because the energy industry is all about infrastructure,” said Yoon during a press conference held in Ulsan, Wednesday.

Yoon Byung-suk, SK gas CEO, speaks during a press conference at Lotte Hotel in Ulsan on Wednesday. [SK GAS]

“We are well aware of rising discussions on hydrogen and ammonia, and readying ourselves for them, but the visions won’t come into reality overnight,” said Yoon, stressing that “we believe that LNG will be the bridge” for such a long-term transition.

Though Korea aims to ultimately move away from LNG, it is widely considered a more realistic alternative to coal in the short term, as it emits comparatively less carbon than coal yet ensures a cheaper and more stable electricity supply compared to renewables, at least for now.

According to Yoon, the year 2024 will be a turning point where SK gas will accelerate its business transition.

And its upcoming 1.4-trillion-won dual fuel-powered combined-cycle plant will “be an anchor to that change,” said Yoon.

On Wednesday when journalists visited Ulsan, tower cranes were standing tall over the bustling construction site where two 410.5-megawatt gas turbines and one 406-megawatt steam turbine have been set in place.

SK gas aims to complete the installation of the main components by October.

Named the Ulsan Gas Power Solution, or Ulsan GPS, the 140,000-square-meter (34.6 acres) combined-cycle power plant is Korea’s first power plant that can burn both LNG and LPG as fuels.

The power plant, which began construction in September last year, is the first of its kind in the world deployed at such a scale, according to SK gas. The commercial operation will begin in August 2024.

A bird's-eye view of SK gas' 1.4-trillion-won GPS power plant construction site in Ulsan [SK GAS]

When completed, the plant will have a generation capacity of 1.2 megawatts, enough to power approximately 2.8 million households a year, which is equivalent to that of a nuclear power plant.

Being a dual-fuel power plant means that the Ulsan GPS will be able to respond flexibly to the fluctuating energy price. The plant will be able to burn LPG instead of LNG when the LNG price soars, as in the case of last year when the war in Ukraine pushed up fuel prices drastically.

SK gas said its existing LPG infrastructure, as well as the upcoming LNG terminal the company is currently building in collaboration with the Korea National Oil Corporation in Ulsan, has enabled such business model.

SK gas has one of the world’s largest LPG storage facilities, with a capacity of 270,000 tons, as well as the LNG terminal under construction, both in close vicinity of the Ulsan GPS.

The company also plans to deploy hydrogen at Ulsan GPS in the future.

Amid shrinking LPG demand, SK gas hopes to achieve 500 billion won in pre-tax profit from its new businesses by 2030, while expecting profit from its LPG business to shrink from last year’s 304.7 billion won to 250 billion won during the same period.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]