South Korea’s SK Energy signs SAF supply contract with Cathay Pacific

South Korea's SK Energy has signed a contract to supply 20,000 mt of sustainable aviation fuel to Hong Kong's Cathay Pacific, the oil refiner said in a statement on March 11.

Under the agreement, SK Energy will supply ISCC-certified SAF to Cathay Pacific until 2027. Deliveries have been underway at Incheon International Airport since November 2024, it said.

This agreement follows SK Energy's first SAF export to Europe in January.

The airline plans to gradually expand its use of SAF on additional routes as part of its broader sustainability strategy.

The deal positions SK Energy as a key player in Asia's SAF market, a sector that is gaining traction in response to global aviation industry mandates to cut carbon emissions. Hong Kong International Airport, one of the busiest transit hubs in the region, provides SK Energy with a strategic entry point to strengthen its influence in the growing SAF sector.

Growing SAF market and policy push

The agreement comes as demand for SAF surges, driven by regulatory mandates and airline sustainability commitments.

The International Air Transport Association aims to cut aviation-related carbon emissions by 50% from 2005 levels by 2050, prompting governments worldwide to enforce SAF blending requirements.

In the EU, all departing flights must now use a minimum of 2% SAF, rising to 6% by 2030 and 70% by 2050.

The US has set a target to fully replace conventional jet fuel with SAF by mid-century.

In the Asia-Pacific region, Singapore will impose a SAF levy with a 1% blending target in 2026. Meanwhile, South Korea plans to mandate the use of a 1% SAF blend for all departing international flights from the country from 2027 and will provide tax breaks and other incentives to local refiners to invest in this greener fuel.

SK Energy's SAF expansion

SK Energy has been ramping up SAF production capacity to meet rising demand. In September 2024, the company established a facility capable of producing 100,000 mt of SAF annually using co-processing technology.

This method integrates biofeedstocks into existing refinery infrastructure, enabling the large-scale production of lower-carbon fuels such as SAF and bionaphtha.

Industry experts view SK Energy's SAF push as a strategic move to capture a larger share of the rapidly expanding market.

Regional and competitive implications

The deal reflects broader competition among refiners in the Asia-Pacific region to establish SAF supply networks. Singapore's Neste and Japan's ENEOS are also investing in SAF production, aiming to meet increasing demand from international carriers.

For Cathay Pacific, securing a steady SAF supply aligns with its commitment to achieving net-zero carbon emissions by 2050. As China's aviation sector continues its post-pandemic recovery, airlines across the region are under pressure to accelerate their transition to sustainable fuels.

In January, SK Energy successfully exported SAF to Europe, marking a first for a Korean oil refiner. This milestone comes just four months after the company commenced commercial production. SK Energy produced SAF through co-processing methods that refine bio-based materials such as used cooking oil and animal fats.