SK Gas's new gas combined cycle power plant, Ulsan GPS (Gas Power Solution), is about to begin commercial operation, and it is expected to generate annual revenue of 1 trillion won starting next year, contributing to improved performance. Ulsan GPS can use liquefied petroleum gas (LPG) as well as liquefied natural gas (LNG) as raw materials, and there are expectations for improved profitability due to a decrease in raw material prices with the increase in LNG production and exports by the second-term Trump administration.

According to industry sources on the 23rd, SK Gas will start commercial operation of Ulsan GPS at the end of this month. Ulsan GPS is the world's first LNG-LPG combined gas combined cycle power plant, built with an investment of 1.4 trillion won, which began construction in March 2022. The equity structure is 99.5% owned by SK Gas and 0.5% by Korea Development Bank. Ulsan GPS has a power generation capacity of 1.2 gigawatts (GW), similar to that of a nuclear power plant, providing electricity for approximately 2.8 million households (based on 250 kWh per household per month) annually.

Overview of SK Gas's Ulsan GPS. /Courtesy of SK Gas

The LPG used by Ulsan GPS is directly procured from SK Gas's Ulsan base, while LNG is supplied through a pipeline from the Korea Energy Terminal (KET), located about 5 km away. KET is a large energy terminal established by SK Gas and the Korea National Oil Corporation with a total investment of 1.2 trillion won, and it is the only facility in the country that can store both oil and LNG.

According to Cham Bit City Gas, as of December, the energy prices for sales (general) based on an effective calorific value of 1,000 kcal are 119.97 won for LNG and 193.19 won for LPG. LNG tends to show larger price fluctuations as it is sensitive to international market conditions. A representative of SK Gas noted, "When LNG prices rise, we can use relatively cheaper LPG, allowing for stable electricity production even during times of high energy price volatility."

Financial information provider FnGuide estimates that SK Gas will record 6.93 trillion won in revenue and 224.1 billion won in operating profit this year. This marks a decrease of 0.88% in revenue and 26.18% in operating profit compared to the previous year, due to a reduction in operating rates among petroleum and chemical corporations, the largest consumers of LPG, amid worsening market conditions.

Securities analysts expect that the operation of Ulsan GPS will increase SK Gas's revenue by around 1 trillion won next year. The projected performance for SK Gas next year is 8.63 trillion won in revenue and 423.5 billion won in operating profit, which are increases of 16% and 89%, respectively, compared to this year.

Inside view of the LNG tank at Korea Energy Terminal (KET) in Ulsan North Port. /Courtesy of Lee Yoon-jeong

The energy policy of the second-term Trump administration, which will take office early next year, is expected to positively influence Ulsan GPS. Generally, American energy has longer transportation times and incurs higher logistics costs compared to Middle Eastern energy.

However, President Trump has emphasized deregulation of fossil fuels and increased production, which is expected to lead to a decrease in prices as LNG production and exports increase in the U.S. American economic media CNBC quoted an RBC Capital Markets report stating, "The unprecedented new supply of LNG will reshape the global market over the next few years."

Jeon Yu-jin from the Research Institute at iM Securities said, "If LNG production expands in the U.S., privately-owned power plants like SK Gas can save costs by directly procuring American LNG for use."