SK Energy boosts Korean SAF ambitions with 40% stake in largest UCO collector

SK Trading International, the trading arm of South Korean SK Energy, has acquired a 40% stake in the country's largest used cooking oil (UCO) collector, Daekyung O&T, it said in a statement Oct. 17, as it aims to secure feedstock supply for biofuels like sustainable aviation fuel (SAF).

This comes after the company inked an agreement Oct. 16 to form a consortium with state-run Korea Development Bank and local private equity firm Eugene PE to acquire Daekyung O&T, with SK Trading International taking a 40% stake and the remainder split between the other two investors.

"Proactive preparation for the SAF market in line with our 'Carbon to Green' strategy is essential for sustainability of aviation fuel market. We will not stop at investing in Daekyung and continuously make efforts domestically and internationally to evolve into a specialized trading company that provides a stable supply of SAF to industry," SK Trading International CEO Suh Sok-won said.

Daekyung O&T is South Korea's largest waste-based raw material supplier for biodiesel and SAF, and procures animal fats and UCO from slaughterhouses, restaurants, and food factories.

Beyond this acquisition, SK Trading International has also pledged to invest further in other local waste collectors to ensure stable supply of feedstock, it added in the statement.

Previously, the firm had invested in Sichuan Jinshang, the largest UCO supplier in southwest China, to secure raw materials for SAF. The group also last year made investments in US-based Fulcrum BioEnergy, which refines synthetic crude oil to SAF.

Feedstocks like UCO have been gaining prominence as key raw materials to produce biofuels, including SAF, as global demand for the cleaner aviation fuel is expected to pick up. Global SAF consumption is expected to reach 2.1 million b/d by 2050, displacing almost 24% of global jet fuel demand, according to S&P Global Commodity Insights' SAF Market Outlook report in September.

In the EU, fuel suppliers must ensure that 2% of the fuel available at its airports is SAF in 2025, rising to 6% in 2030 and eventually 70% in 2050. Meanwhile, the US aims to produce 3 billion gallons per year of SAF domestically by 2030, with plans to scale output to 35 billion gallons/year by 2050.

However, SAF demand in Asia has largely been driven by airlines and arbitrage opportunities to the West, the report added.

In September, South Korean flag carrier Korean Air launched a program to use SAF for air cargo operations. The flag carrier also partnered GS Caltex in June to conduct test flights using SAF, and the results will be used by the Korean government to establish SAF quality standards and accelerate commercialization.