Despite success in their primary business, local oil refiners are busy tapping into new business sectors in search of other growth engines ahead of a post-petroleum era.
The top three firms, SK Innovation, GS Caltex and S-Oil, announced last month that they have found an initial target for new renewable energy: SK and GS are looking to rechargeable batteries and S-Oil, solar photovoltaics (PV).
Today, renewable energy is the fastest growing industry in the world and its global market is expected to grow from the current $250 billion (268.52 trillion won) to $1 trillion by 2020.
Observers say that refiners loaded with cash from soaring oil prices are aggressively expanding into new areas to secure mid- and long-term growth engines for the future with the recognition that the existing business model cannot ensure sustainability.
GS has set up four affiliates over the past three years for new business, headlining the recent move. It announced on May 13 that it formed a 50-50 joint venture, Power Carbon Technology, with JX Nippon Oil and Energy, Japan’s top oil company, to build a plant with an annual production capacity of 2,000 tons of anode materials for lithium-ion rechargeable batteries in Gumi, North Gyeongsang Province, by the end of 2011. Anode materials are one of the key components in lithium-ion rechargeable batteries as well as lithium-ion battery separators (LiBS) and cathode materials. Cathodes and anodes refer to the positive and negative ends of a traditional battery.
According to the nation’s No. 2 refiner, the plant’s annual output accounts for around 10 percent of last year’s global demand for the materials and it plans to boost the capacity to 4,000 tons depending on the market situation.
In addition, GS advanced into the waste-to-energy business after establishing GS Platech last year.
According to the firm, its affiliate’s plasma technology can convert waste into energy using cost-efficient and eco-friendly methods by taking advantage of the characteristics of plasma.
SK, the largest refiner in Korea, followed suit this week, as it broke ground for a factory in Seosan, South Chungcheong Province to produce batteries for electric vehicles as part of its drive to secure a next-generation revenue source.
It said that the plant, scheduled to be built by early 2012, will churn out 200-megawatt-hour (MWh) batteries and it has a plan to raise its production capacity for 500 MWh units by the end of 2012.
SK, which completed its first battery plant in May 2010 to produce 100-MWh batteries in Daejeon, South Chungcheong Province, will be able to produce 600-MWh batteries in its plants by the end of 2012, which can annually supply power to more than 30,000 electric cars that can travel at speeds of over 60 kilometers per hour.
The oil-refining firm plans to supply batteries to Mercedes-AMG GmbH and Mitsubishi Fuso, two units of Germany’s Daimler AG as well as local manufacturers Hyundai Motor and Kia Motors.
SK, which changed its name from SK Energy and spun off its affiliates in order to make a smooth transition for new businesses, also cranks out LiBS, a key component in electric vehicle batteries. It started building its sixth and seventh LiBS plants in April last year in order to begin mass production in 2012.
S-Oil has finally tapped into a fresh enterprise, the solar PV business, after deciding to purchase a third of Hankook Silicon, a local manufacturer of poly-silicon, for 265 billion won. Poly-silicon is used in producing photovoltaic cells.
Through the deal, S-Oil will become the second largest shareholder after Osung LST and will participate jointly in the management of Hankook Silicon. Both sides are scheduled to finalize the transaction this month.
S-Oil has pushed hard to enter the renewable energy business as one of its three strategies for sustainable growth, plans to take this investment as an opportunity to implement a low carbon green growth initiative through win-win cooperation with small- and medium-sized companies.
The solar PV business is expected to take up the largest share of the renewable energy market. In particular, the global construction plans for nuclear plants have gone backwards due to the recent nuclear crisis in Japan. Under these circumstances, solar PV generation is forecast to benefit most since it can quickly fill the electricity supply vacuum caused by the closure of nuclear plants with advantages such as low location constraints and short construction periods, let alone high levels of safety and stability.
“Due to the accelerating exhaustion of oil resources and mounting concerns over environmental pollution caused by fossil fuels, oil refiners are rushing to new renewable energy,” said an official in the industry.
“In addition, last year’s impressive earnings also helped them to prepare for the post-petroleum era.”
