South Korea’s GS Caltex nears completion of biofuel refinery construction in Indonesia

South Korea's second-biggest refiner, GS Caltex, is nearing completion of the construction of its AGPA Refinery Complex (ARC) in Indonesia -- a pivotal step towards establishing a stable supply chain for bio raw materials.

The palm oil refining plant, located in the Balikpapan Industrial Complex in East Kalimantan, is set to commence operations within the third quarter of this year, with a production capacity of 500,000 mt/year, a public relations manager at GS Caltex told Platts July 17.

This initiative positions GS Caltex as a leader in the biofuel sector, strengthening its value chain amid rising global demand. The ARC facility is expected to produce bio raw materials and edible oils that can be processed into bio-jet fuel (SAF), bio-marine fuel (BMF), and biodiesel, which are increasingly recognized as future growth areas for refiners, he added.

For the biofuel project, South Korea's GS Caltex and POSCO International established the ARC joint venture in March. GS Caltex holds a 40% stake in the JV, while POSCO International controls 60%.

As the biofuel market is projected to surge from $14.5 billion last year to $402 billion by 2034, the importance of securing reliable sources of bio raw materials has never been more critical, industry participants said.

The European Union and the US are intensifying their focus on sustainability. The EU plans to increase the mandatory blending ratio of bio-jet fuel to 70% by 2050, and the US aims for 100%.

In this context, GS Caltex's collaboration with POSCO International to bolster the bio raw material supply chain in Indonesia is particularly strategic, a company official said.

With limited domestic bio raw materials available, the South Korean government and industry are exploring various strategies to diversify supply sources and establish robust supply chains.

This effort is essential not only for compliance with Sustainable Aviation Fuel (SAF) blending requirements but also for contributing to global sustainability goals. GS Caltex's initiative to recycle palm wastewater from palm oil factories in eastern Indonesia is a prime example of how the company is addressing these challenges, the refinery official said.

"By introducing the first palm wastewater evaporation and concentration treatment facility in Indonesia, GS Caltex aims to reduce methane emissions and enhance the recovery of palm oil," the refiner said in a statement.

As major shipping companies actively pursue the adoption of bio-marine fuel, GS Caltex has already supplied over 50,000 tons of bio-marine fuel as of February this year.

"Biofuel is one of the promising future businesses that refiners can pursue," a sales and marketing executive at GS Caltex said, emphasizing the critical nature of securing stable raw materials.