Why Are Hydrogen and Drones Coming Out of There油?

Post-COVID, Survival Strategies for Global Companies

Major Transformation in the Petroleum Industry Accelerated by COVID-19

Refineries Accelerate Digital Transformation Projects

Achievements in New Growth Engines Such as Electric Vehicle Batteries

Building Smart Plants Integrating AI and Big Data

Gas Stations Utilized as Next-Generation Mobility Hubs

[Asia Economy Reporter Park So-yeon] Last year, an unusual scene unfolded off the coast of Jeju where oil-laden ships were unable to dock on land and drifted at sea. Due to the rapid decline in demand for petroleum products caused by the spread of the novel coronavirus disease (COVID-19), there was a shortage of storage tanks for crude oil, resulting in oil tankers waiting without being able to unload their cargo. The cost of storing crude oil on tankers at sea is about 50 million KRW per day per vessel. In this frustrating situation where crude oil could neither be used nor sold, the cumulative losses of the four major refineries last year are estimated to have reached approximately 5 trillion KRW. Although some refineries briefly returned to profitability, the outlook for this year remains bleak due to the resurgence of COVID-19 and the resulting weak demand for petroleum products. Although international oil prices have recently been on the rise, refining margins, which directly affect profitability, remain sluggish. There are even forecasts that the 'end of the oil giant era' is near. Industry experts believe that the difficulties faced by the refining industry cannot simply be seen as a temporary phenomenon caused by the pandemic. Both global oil majors and domestic refineries are declaring their transformation from traditional oil companies into integrated energy companies. They are striving for a complete overhaul through pioneering new business sectors and digital transformation.

◆COVID-19 Accelerates the Declaration of the 'End of the Oil Era'

Last year, the petroleum industry received a report akin to a death sentence. British Petroleum (BP), the world's largest energy company, predicted in its 'Energy Outlook 2020' report that future oil demand would not return to pre-COVID-19 levels and would significantly decline. This report completely overturned previous analyses that had forecast continuous growth over the next decade until 2019. In scenarios assuming rapid increases in carbon credit prices, there was even a warning that oil consumption could decrease by 50% by 2050. Furthermore, under carbon neutrality scenarios involving rising carbon credit prices and governments' renewable energy transition policies, a pessimistic forecast suggested that oil consumption could drop by as much as 80%. This signaled the end of the oil era due to the establishment of a decarbonization policy.

◆Refineries Innovating to Survive

Domestically, refineries rooted in the petroleum industry such as SK Innovation, GS Caltex, S-OIL, and Hyundai Oilbank have felt the crisis for several years and are struggling to innovate. The four major refineries are focusing on finding new growth engines beyond the refining business, which has low operating profit margins and is heavily influenced by external factors such as the global economy and oil prices.

The shift from petroleum to chemicals has already shown significant effects in terms of operating profit margins. They are also achieving notable results in the electric vehicle battery business, considered a new energy sector. SK Innovation is making large-scale facility investments not only in Korea but also in Europe, the United States, and China, securing orders from major clients. Although it has not yet reached profitability, considering its explosive growth, it is regarded as the next-generation profit source surpassing refining and chemicals. The hydrogen business, known as the 'dream energy,' is also attracting attention from the refining industry. Hyundai Oilbank plans to increase hydrogen refueling stations to 80 by 2025 using existing gas station infrastructure and operate up to 180 stations by 2030.

◆Refineries Seeking a Complete Overhaul through Digital Transformation

Alongside pioneering new business sectors, refineries are also focusing on digital transformation (DT).

SK Energy has decided to expand its 'smart plant' integrating artificial intelligence (AI) and big data technologies across all processes at its Ulsan Complex (CLX) to overcome the crisis in its core petroleum refining business. AI technology is also being applied to the factory wastewater treatment process, and from 2027, the company is considering building a 'bio aviation platform' to reduce pollutant emissions from aviation fuel. Regarding automobiles, SK Energy plans to enhance its 'all-in-one car care platform' that provides integrated services and apply digital technologies to over 3,000 SK Energy gas stations nationwide to create spaces where used car transactions and electric vehicle charging are possible. GS Caltex participated for the first time this year in CES 2021, the world's largest IT and electronics exhibition, to pioneer new markets. From January 11 (local time), GS Caltex showcased drone delivery based at gas stations and the future concept of gas stations at the online CES 2021. The company plans to develop models that utilize gas stations as hubs for electric and hydrogen vehicle charging, car sharing, micro-mobility, drone delivery, and also as facilities for drone storage, charging, maintenance, and drone taxi hubs.

An industry insider said, "Digital transformation will be a means for the energy and petrochemical industries to create new economic and social value through advanced technologies."

This content was produced with the assistance of AI translation services.