Korean refiners call for government support to boost sustainable aviation fuel production

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Korean refiners call for government support to boost sustainable aviation fuel production

Published: 30 Sep. 2025, 10:34 Updated: 30 Sep. 2025, 19:17

Audio report: written by reporters, read by AI

A view of SK Energy’s co-processing sustainable aviation fuel (SAF) production facility at its Ulsan Complex. [SK INNOVATION]

As the 2027 deadline for the government mandate to mix sustainable aviation fuel (SAF) in all commercial flights nears, major refiners are hurrying to meet the demand for the growing market while also calling for government support for the large investment needed for early-stage infrastructure.

Under a road map announced by the Ministry of Land, Infrastructure and Transport and the Ministry of Trade, Industry and Energy on Sept. 19, airlines must blend at least 1 percent SAF into aviation fuel supplied to international flights departing Korea beginning in 2027. The mandate will increase to 3 to 5 percent by 2030 and reach 7 to 10 percent by 2035.

SAF, which can reduce carbon emissions by up to 80 percent compared to conventional jet fuel, is gaining global momentum as countries seek to meet net-zero targets. But Korea’s refining industry, which has faced mounting deficits and declining margins, sees the fuel as both an opportunity and a financial burden.

The world’s SAF market, estimated at $1.7 billion last year, is projected to grow to $74.6 billion by 2034 at an annual average rate of 46.2 percent, according to Global Market Insights.

Korean refiners — SK Energy, GS Caltex, S-Oil and HD Hyundai Oilbank — have begun scaling up production, mostly through co-processing, a method that blends bio-based feedstock into existing refinery units. But the process yields just 10 percent SAF, making it insufficient to meet the coming mandate without large-scale investment in dedicated facilities.

SK Energy began SAF production in September last year at its Ulsan complex after investing 15 billion won ($10.6 million), and exported to Europe in January — the first Korean company to do so. In March, it signed a supply deal with Hong Kong-based Cathay Pacific.

GS Caltex collaborated with Finnish renewable fuel company Neste Corporation to supply SAF and conducted a test flight with Korean Air in September 2023. It has since begun supplying SAF to Korean carriers.

A shipment of sustainable aviation fuel exported by GS Caltex arrives at Chiba Port in Japan. [GS CALTEX]

HD Hyundai Oilbank exported SAF to Japan in June last year and will supply Korean Air flights on Japan routes in September. S-Oil began supplying SAF to both Korean and foreign airlines in August 2024 and is now considering building a dedicated SAF production facility.

But expanding beyond pilot operations will be costly. Industry estimates suggest at least 1 trillion won is needed to build a single SAF-dedicated plant. With refining losses reaching a combined 1.5 trillion won in the first half of 2025, refiners are calling for government subsidies and tax incentives.

“Competition to lead the SAF market was intense until last year,” said Kim Tae-hwan, head of oil policy research at the Korea Energy Economics Institute. “But widening losses have reduced the refiners’ investment capacity this year. SAF is certainly a promising long-term business, but the global demand outlook remains uncertain and feedstock sourcing is difficult, so companies must weigh the risks.”

Other countries have already moved to ease the financial burden. The U.S. Inflation Reduction Act provides up to $1.75 per gallon in tax credits for SAF, while Japan offers a tax credit of 30 yen ($0.20) per liter under a domestic production incentive scheme.

“To establish a viable SAF market in Korea, the domestic production tax credit system under discussion in the National Assembly must include SAF,” a Korea Petroleum Association official said.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY CHOI SUN-EUL [[email protected]]