Korea falls behind in global SAF race, lacks production facilities

South Korea does not have any dedicated sustainable aviation fuel (SAF) production facilities, while there are about 320 SAF production facilities worldwide, raising concerns as global efforts to reduce carbon emissions intensify.

According to the International Civil Aviation Organization (ICAO) on Monday, the United States leads the industry with 100 of the 323 SAF production facilities worldwide, followed by Canada with 27, France with 19, and the United Kingdom with 15. In Asia, neighboring countries such as China and Japan have 13 and 12 facilities respectively, with ongoing efforts to build more. Korea, however, has none.

The United States alone has an annual SAF production capacity of 36.3 billion liters, far exceeding Canada’s 6.5 billion liters and France’s 1.8 billion liters. With North American and European countries actively establishing SAF production systems, there are growing calls for Korea to close the gap and strengthen its SAF industry. Concerns are growing, particularly for the domestic oil refining industry, that the world‘s leading aviation fuel exporter could fall behind if it does not keep up with rapidly changing market trends in a timely manner.

SAF is produced from alternative raw materials such as waste cooking oil and municipal waste, rather than fossil fuels such as petroleum and coal. Known as carbon-neutral aviation fuel, SAF reduces greenhouse gas emissions by 40 to 82 percent compared to traditional aviation fuels.

With air travel demand rebounding post-pandemic and a heightened focus on reducing greenhouse gas emissions, SAF has become a key topic in both the aviation and oil refining sectors. The ICAO will mandate that all aircraft departing from the 27 European Union countries use at least 2 percent SAF from 2025 onwards, which will increase to 70 percent by 2050. The SAF market is expected to grow 20-fold by 2027.

Korea’s four major oil refiners are currently investing heavily in SAF, with plans to inject around 6 trillion won ($4.3 billion) into eco-friendly fuel sectors by 2030. S-Oil Corp. became the first domestic oil refiner to use bio-feedstocks in its refining process in January 2024 and received the Carbon Offsetting and Reduction Scheme for International Aviation certification from the International Sustainability & Carbon Certification (ISCC CORSIA). HD Hyundai Oilbank Co. achieved a milestone in June of that year by becoming the first domestic company to export SAF to Japan. Both companies are producing SAF via “co-processing,” which combines bio-feedstocks with existing refining facilities, but they still lack dedicated SAF production facilities.

SK innovation Co. plans to test SAF production using bio-feedstocks by the end of 2024 and is developing new technologies using green hydrogen and carbon dioxide. GS Caltex Corp. signed a memorandum of understanding with Korean Air Lines Co. in June 2023 to promote bio-aviation fuel and is preparing for ISCC CORSIA certification.

The oil refining industry is calling for government support to build large-scale facilities dedicated to SAF., The government will actively promote policies to boost the SAF market from the second half of 2024, including announcing an SAF expansion strategy and implementing commercial fueling plans. An amendment to the law on fossil fuels and their alternatives, which will come into effect on September 7th, 2024, will also permit the mixing of eco-friendly refining feedstocks within the petroleum refining sector, supporting increased SAF production.

“Expanding investment tax credits for SAF facilities and providing differential support incentives for SAF production and use are necessary to gain global competitiveness,” a Korea Petroleum Association official said.