SK Group’s chemical and pharmaceutical subsidiary, SK Chemicals Co., launched a project to merge biodiesel with petroleum-based fuels to create vessel fuel amid demands for cleaner energy sources that will comply with International Maritime Organization’s (IMO) new regulations.
According to industry officials, Korea’s top biofuel maker started feasibility and safety tests on bio heavy oil as it eyes a new possible market in the shipping industry, such as large vessels like container ships.
The company produces the bio heavy oil from used cooking oil, animal fat, and by-products of bio-diesel processing, making it an environmentally-friendly fuel source for power generation and transportation. The company mainly uses a non-edible palm-oil, palm fatty acid distillate, as a feedstock from Malaysia and Indonesia.
SK Chemicals Co. began its bio heavy oil business in 2006, supplying oil to domestic power plants, such as the Korea Midland Power Co. The state-run power plant earned 50 billion won ($43 million) in profits last year and produced 80,000 kiloliters of heavy oil.
The IMO recently mandated that from January 2020, vessels must reduce their environmentally harmful emissions by installing devices capable of removing emissions or by burning fuel from the current 3.5 percent down to 0.5 percent.
Bio heavy fuel has a greater advantage in cost compared to traditional bunker oil for fueling ships, though higher costs of production remain a hurdle. The bio heavy fuel is priced at only 40 percent of the current low-sulfur oil.
However, guidelines for specifications for blending biofuel oil with low-Sulphur fuel oil, which is currently primarily used for local transportation and power generation, are still in progress.
SK Chemicals has the capacity to produce 500,000 kiloliters annually of biofuel oil and biodiesel. The company, last year, began exporting to Europe approximately 20,000 kiloliters of biodiesel.
According to the 2020 IMO guidelines for Sulphur limits, globally diesel fuel should only contain up to 7 percent of biodiesel.