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THE INVESTOR
March 21, 2019
Big Reunion

Industrials

Oil refiners appear passive toward government’s hydrogen drive

  • PUBLISHED :March 03, 2019 - 16:37
  • UPDATED :March 03, 2019 - 16:37
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Despite the South Korean government’s ambitious announcement on creating a hydrogen economy this year, oil refiners appear to be taking a passive stance toward the plan, citing questions over profitability when jumping into the hydrogen business.

In January, the government announced its road map to boost the hydrogen economy, aiming to produce 6.2 million fuel cell vehicles by 2040 and to become the largest hydrogen car producer in the world. The government plans to fuel 250,000 hydrogen cars with 50,000 tons of byproduct hydrogen. 





Byproduct hydrogen is made in the process of oil refining and making petrochemicals and steel. In Korea, four major oil refining companies -- S-Oil, GS Caltex, Hyundai Oilbank and SK Innovation -- produce hydrogen byproducts through oil refining and petrochemicals, which they recently invested.

But some industry insiders say producing 50,000 tons may not be realistic, as oil refiners are now focusing on non-oil refining businesses, such as rechargeable batteries. To achieve the goal of producing 50,000 tons, they might have to purchase byproduct hydrogen from others.

SK Innovation, which is the nation’s largest oil-refining firm and has recently expanded into petrochemicals, said, “Although we produce hydrogen byproducts, we have to re-use them for the chemical process, and it is significantly insufficient.”

Kim Pyung-joong, an executive of the Korea Petrochemical Industry Association, said hydrogen byproducts could satisfy the government’s needs in the short term, but things may change in the future, as it is still “not generous” because byproducts are not something that can be produced arbitrarily.

Last week, Hyundai Motor announced it would invest 8 trillion won to build 500,000 hydrogen cars by 2030.

“It seems the government began the move without fully having related infrastructure. Since the technology to produce hydrogen is in the early stages, the nation may have turn to imported fuel if it wants to push the drive,” said an insider of an oil refining company.

Charging stations are also another obstacle.

Despite the world’s first title, Korea is still behind in the distribution of fuel-cell cars due to the lack of infrastructure for producing, storing and charging fuel cells. As of October 2018, 5,715 cars were sold in the US, 3,359 cars were distributed in Japan, 926 cars in Europe and 794 cars in Korea.

There are currently only nine stations nationwide, with only two in Seoul, though the government aims to produce 4,000 hydrogen cars this year. This is compared to Japan, which is a rival in hydrogen. It has more than 100 charging stations.

Oil refining companies are hesitant to jump into the hydrogen station business due to uncertainties and high operating costs.

To create hydrogen-filling stations, there needs to be tanks to store hydrogen and reforming facilities to produce hydrogen and large sites. Running hydrogen tanks also generates high power costs.

“Because oil-refining companies do not produce hydrogen, they first have to find the hydrogen supplier and then they also need to find large site to have tanks in cities where this is hard to find. It is not easy to jump into the business because profit is not guaranteed,” said an oil-refining insider.

Shin Jae-haeng, chief operating officer of H2Korea, said, “Korea’s hydrogen technologies are concentrated on automobiles, and we lack technologies for production and storage hydrogen. It is necessary to have systematic research and development to build a hydrogen eco-system in the longer term.”

 By Shin Ji-hye/The Korea Herald (shinjh@heraldcorp.com)

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