Posco International looks to renewables, LNG to keep up with changing times

Industry

Published: 23 Feb. 2023, 12:00 Updated: 23 Feb. 2023, 17:54

Posco International looks to renewables, LNG to keep up with changing times

Wind turbines on Jaeun Island in Sinan County, South Jeolla, on Tuesday [SHIN HA-NEE]

SINAN, South Jeolla - Towering along the coastline of one of Korea's southwestern islands, a row of 77-meter-tall (253-foot-tall) wind turbines whooshed as their blades cut through the air.

Situated on Jaeun Island in Sinan County, South Jeolla, the onshore wind farm is run by Posco International, an energy and trading company.

As the global energy transition accelerates, Posco International is bracing for the big shift.

The 62.7-megawatt wind farm, which began first-stage commercial operation in 2016, is one way they're preparing for the change.

“With the operation rate of 21 percent, the wind farm generates electricity of about 115,000 megawatt-hours a year, which has the effect of reducing 50,000 tons of carbon emissions,” said Shin Chul-hong, CEO of Sinan Green Energy on Tuesday during a press event held at the company’s office in Sinan.

Sinan Green Energy is a special-purpose company established for the operation of the wind farm. Posco International owns 54.53 percent, SK E&S holds 35 percent, Korea District Heating 10 percent and Meritz Securities 0.47 percent.

For Posco International, its energy business has two axes: the LNG business, where the company seeks growth in quantity; and renewables and hydrogen, which the company believes will lead the qualitative growth in its business portfolio amid the global energy transition.

When journalists stood on a hill to overlook the wind turbines lined up along the coastline, the sea breeze was blowing at a velocity of around 8 meters per second (17.9 miles per hour).

The 20 wind turbines — of which 14 were made by Doosan Enerbility, and the rest by Denmark’s Vestas — generate electricity when the wind speed is between 3 meters and 25 meters per second.

In terms of profitability, renewables are far behind fossil fuels at this point.

The wind farm revenue was 19.9 billion won ($15.3 million) last year, reporting a net profit for the first time. Its operation rate stood at 21 percent on average, which is not that high considering that 25 percent is the general benchmark for an onshore wind farm's profitability.

“The main goal of the company is to provide RECs [renewable energy certificates] for shareholders rather than generating profits,” said Shin.

Still, Posco International aims to ramp up its renewable energy generation from last year’s 0.1 gigawatts to 2.4 gigawatts by 2030.

The company is also pushing for a 1.6-trillion-won offshore wind farm project with Korea South-East Power, with plans to begin construction in December next year.

Nevertheless, Posco International’s main source of operating profit is its LNG businesses, and it will remain that way at least for a while.

At Posco International's Gwangyang LNG Terminal, about 200 kilometers (124 miles) east of Sinan, massive LNG tanks stand tall near a dock where a liquefied petroleum gas (LPG) carrier was standing.

Posco International is currently building its second LNG terminal along with a sixth LNG storage tanker in its first terminal.

Posco International's Gwangyang LNG Terminal in South Jeolla [POSCO INTERNATIONAL]

The inside of the upcoming LNG tank looked like a dome stadium with a high ceiling. A 4-centimeter (1.6-inch)-thick high-manganese steel wall developed by Posco was in the works, being built about 1.2 meters away from the external concrete wall.

The space between the steel and concrete wall will be filled with a perlite-based insulator, according to Seo Gi-seok, head of the terminal construction project team.

“We will fill in this tank with LNG up to a height of 40 meters above ground,” said Seo.

The tank is designed to be able to withstand a missile attack and up to a 6.5-magnitude earthquake, according to Seo.

Inside Posco International's liquefied natural gas storage tanker under construction in Gwangyang, South Jeolla, on Tuesday [SHIN HA-NEE]

LNG is often referred to as a “bridge energy,” filling in the gap between coal and eco-friendly alternatives such as renewables and hydrogen, as the latter, as of yet, still lacks technological stability and cost efficiency compared to traditional fossil fuels.

As Posco Energy, an LNG power plant operator, merged with Posco International last year, the resulting company secured a full LNG value chain from gas development and LNG storage to energy generation.

Posco International makes money by leasing the LNG container tanks to Posco, S-Oil and SK E&S.

“The Gwangyang LNG Terminal holds significance as it is the first LNG terminal operated by a private company,” said Jo Seung-ryong, head of the Gwangyang terminal division at Posco International.

The Gwangyang LNG Terminal has five LNG storage tanks with a combined capacity of 730,000 kiloliters (192.8 million gallons), which can provide gas heating to 9 million households for a month.

When the ongoing construction of the sixth LNG tank is completed, the first LNG terminal will have a storage capacity of up to 930,000 kiloliters.

The construction of the second LNG terminal began in January with a budget of 930 billion won. When the terminal is completed by 2030, the combined capacity will reach 2.13 million kiloliters.

While LNG tank container leasing remains as the most stable and profitable business in the Gwangyang terminal, Posco International also runs test drive services for LNG or LPG carriers.

A liquefied petroleum gas carrier named Mercartor built by Hyundai Samho Heavy Industries docked at Posco International's Gwangyang LNG Terminal [POSCO INTERNATIONAL]

On Tuesday, an LPG tanker built by Hyundai Samho Heavy Industries (HSHI) was docked at the Gwangyang terminal, waiting for a test operation before being handed over to a Greek ship owner.

“As there is a growing global trend toward environmental consciousness, we designed and built a ship to reduce air pollution,” said Seo Jeong-ho, a shipbuilding commander of the LPG carrier project at HSIS.

From January this year, four ships have been tested. Posco International ran test operations for 30 ships last year, and, of those, five were from overseas shipbuilders.

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