The South Korean liquefied petroleum gas (LPG) industry seeks new business opportunities to ensure medium- to long-term profitability amidst stagnant LPG demand and ongoing price uncertainties. Major LPG import and sales companies, such as SK Gas and E1, plan to diversify their profits through new renewable energy businesses, including liquefied natural gas (LNG) power generation, hydrogen, and ammonia.
According to the industry on March 26, SK Gas’s Ulsan Gas Power Solution (GPS) is scheduled for trial operations next month and commercial operation in September this year. The Ulsan GPS is a combined cycle power plant using LNG and LPG, currently under construction in the southeastern port city of Ulsan. In 2022, SK Gas invested 1.4 trillion won in this new venture, which will become the world’s first dual power plant capable of utilizing both LNG and LPG upon completion.
With the growing interest in eco-friendly vehicles, such as hybrids and electric cars, the demand for LPG, particularly for transportation purposes, is declining. Starting this year, demand is expected to partially recover due to new regulations banning the registration of new diesel vehicles for delivery and school commuting.
SK Gas intends to mitigate price uncertainties by utilizing LNG. When LPG prices are high, the company will use LNG, and vice versa, thus increasing LPG usage when LNG prices are high. LPG is perceived as a low-cost fuel, making it challenging to adjust prices even when import costs rise due to government and public opinion.
SK Gas plans to expand into hydrogen power generation in the future. The Ulsan GPS will be capable of running on a mixture of hydrogen for power generation after two to three years of commercial operation. The company has also entered the energy storage system (ESS) business, with a 200-megawatt facility in Texas, United States, scheduled for commercial operation in September.
E1 is making a similar move. E1′s consortium with Calista Capital and Meritz Securities was selected as the preferred bidder to acquire an LNG plant put up for sale by Hana Securities on March 16. The industry views E1 as the likely party to secure a stake, since it is the only entity aiming to actually operate the power plant.
E1 has ventured into the hydrogen and ammonia business. The company last year announced a plan to invest 10 billion won in a Canadian blue (clean) ammonia project. The plan is to produce clean hydrogen through carbon capture and storage (CCS) of carbon dioxide from Canadian natural gas, converting it into ammonia, and then importing it to South Korea.
Last year, SK Gas’s sales fell 13.3% to 7 trillion won, and operating profit decreased by 22.2% to 303.7 billion won, while its net profit rose 22.2% to 314.2 billion won. E1′s sales fell 2% to 7.8 trillion won, and operating profit dropped 66.6% to 93.2 billion won, while its net income rose 52.6% to 74.3 billion won.
