Major SAF Deal: SK Energy to Provide 20,000 Tonnes to Cathay Pacific

South Korea SAF Market Takes Off with SK Energy-Cathay Alliance

Seoul, South Korea – The South Korean sustainable aviation fuel (SAF) market is set to take off with regulatory needs driving the demand. In 2027, the government will introduce a 1% SAF blending mandate in line with international efforts to de-carbonize air transport.

South Korea's biggest chemical and renewable energy maker, SK Energy, committed to delivering 20,000 tonnes of SAF to Hong Kong's Cathay by 2027. It is the first time a South Korean refinery has exported a substantial quantity of SAF to a Hong Kong airline, after SK Energy's historic SAF export to Europe in January.

Upscaling SAF Production Capacity

SK Energy produces 100,000 tonnes of SAF every year via a co-processing process of mixing bio-feedstocks with traditional fuel production. The process provides a lower-carbon substitute for traditional jet fuel in support of global sustainability initiatives.

Although global demand for SAF is expected to expand from USD 1.7 billion in 2024 to USD 74.6 billion in 2034, leading fuel producers are streamlining their supply chain. Recent acquisition of Cathay by SK Energy is a strategic move by enhancing its presence in the expanding SAF business.

Global SAF Policies Fuelling Demand

Governments across the world are also cracking down on aviation emissions by revving up airlines and oil companies to switch over to SAF. The 2% SAF mandate across the entire continent will be raised to 70% by 2050 in Europe. The U.S. is also looking towards 2050 for phasing out conventional jet fuel with SAF. South Korea's 1% blending mandate by 2027 is one such global initiative, and Singapore is also looking towards SAF policy.

The stringent regulatory environment has prompted fuel suppliers to their best behavior in seeking long-term relationships with the airlines as an attempt to get established in the market. SK Energy's agreement with Cathay is a pointer in the direction, placing the company firmly as one of the top players in the Asia-Pacific SAF value chain.

The Future of SAF in Asia

As demand for SAF increases, more companies are investing in manufacturing facilities. Additional companies are also entering the business of SAF. Honeywell and AM Green recently partnered to make SAF in India, which reflects how the business is increasing in Asia.

The SK Energy-Cathay deal is indicative of growing business interest in producing and supplying SAF. With the take-up to be driven by regulatory requirements and airline commitments, the market will expand over the next few years.