The trends in POSCO Group’s flagship business area are explained by experts in an easy-to-understand manner. The global energy market is paying attention to liquefied natural gas (LNG), as an alternative to overcome the limitations of renewable energy. In response, POSCO Group is making every effort to establish a LNG value chain, including offshore gas field projects and the construction of LNG terminals. In Part 5, Senior Researcher Young-geun Joo of the POSCO Research Institute sheds light on POSCO Group’s LNG value chain.

Q What is behind the growing attention to LNG in the global energy market?

While there is a long-term push toward eco-friendly renewable energy and hydrogen, the technologies and economic feasibility of these solutions are not yet fully developed. As a result, LNG is being used as a bridge energy source to replace coal power. The main component of LNG is methane, a molecule made up of one carbon atom and four hydrogen atoms. This structure results in lower carbon dioxide emissions compared to coal or oil. Additionally, the refining process removes impurities, leading to lower emissions of nitrogen compounds, other pollutants, and ultrafine particles.

In fact, when generating 1 GMW of power, carbon dioxide emissions vary significantly by energy source: coal power produces 888 tons, oil power 733 tons, gas power 499 tons, combined-cycle (LNG) power 389 tons, solar power 85 tons, and nuclear power 29 tons. While LNG emits more carbon dioxide than renewable or nuclear energy, it shows significantly lower emissions compared to oil and coal power.
Additionally, LNG can also be used as an alternative to address the seasonal and intermittent nature of renewable energy sources and is highly competitive in the global energy market.

Q The LNG value chain has been attracting growing attention. What is the concept of it?

The value chain, described as a “chain of value,” refers to a series of activities through which a company adds value at every step of a product or service process. The process can be divided into stages such as planning and production, distribution, and usage. This entire value chain can then be compared to the flow of a river, categorized into upstream (the upper stream), midstream (the middle stream), and downstream (the lower stream).

The traditional oil and gas industries simply divide the value chain into upstream (production, distribution, and storage) and downstream (utilization). However, in 2016, POSCO Group added the concept of midstream to enhance LNG terminal capabilities, strengthen trading expertise, improve the integration between upstream and downstream activities, and drive business expansion.

▲ LNG value chain (Source: POSCO International)

First of all, upstream involves the exploration and production of natural gas. POSCO International has been producing natural gas in Myanmar since June 2013, after 13 years of development. Midstream deals with the liquefaction, distribution, and storage of natural gas. This stage includes necessary elements such as LNG export terminals or liquefaction terminals, specialized LNG carriers, and import or regasification terminals like the Gwangyang LNG Terminal. LNG trading, the business of trading LNG, is also part of this phase. Lastly, the downstream stage refers to the demand points where natural gas is consumed. These include POSCO’s steel mills, POSCO International’s Incheon LNG Combined Cycle Power Plant, as well as residential, industrial, and commercial facilities that use city gas.

Q What makes POSCO Group’s LNG value chain stand out?

The energy industry requires massive investments, amounting to trillions of won, with operations producing and consuming tens to hundreds of thousands of tons of natural gas in both upstream and downstream sectors. Amid growing volatility in global energy markets driven by factors such as the Russia-Ukraine war and geopolitical tensions in the Middle East, building an LNG value chain allows POSCO Group to maximize synergies and effectively respond to volatility. POSCO Group produces and consumes a large amount of natural gas, which enhances liquidity and allows it to maintain a stable supply to its downstream operations and use trading, swaps, and other mechanisms to ensure a reliable LNG supply even during disruptions.

In upstream, natural gas must be produced and sold at a high price to generate substantial profits, while in downstream, LNG must be purchased at a low price. By linking these through midstream integration, POSCO enhances price flexibility, creating synergies and boosting profitability in both business and revenue.

Q Where and how does POSCO Group produce natural gas?

POSCO International began offshore exploration in Myanmar in 2000, discovered three subsea gas fields, and has been commercially producing natural gas since June 2013. This project stands out as the largest overseas resource development undertaken by a domestic private energy company. POSCO International transports natural gas through a 105-kilometer subsea pipeline and sells it to Myanmar and China via a gas pipeline linked to an onshore terminal in Kyaukpyu, Myanmar.

The daily production is about 500 million cubic feet, which accounts for 9% of Korea’s annual natural gas consumption. Currently, the company is producing natural gas from three subsea gas fields and discovered another subsea gas field, called Mahar, in a nearby area in 2020.

Additionally, POSCO International expanded its upstream operations by acquiring Senex Energy, Australia’s fifth-largest company in the oil and gas sector, in 2022. POSCO International, together with its partner Hancock Energy, plans to invest a total of 650 million Australian dollars by 2026 to acquire Senex Energy and secure natural gas reserves equivalent to 44% of Korea’s annual consumption.

In addition, at the end of 2021, POSCO International won an exploration rights for the PM524 block, located offshore on the eastern side of the Malay Peninsula, from Malaysia’s state-owned oil company, PETRONAS. POSCO International is currently conducting feasibility evaluations and plans to begin exploration and development in 2025. In 2023, POSCO International, through a consortium with Indonesia’s state-owned enterprise PHE^*, acquired exploration rights for the Bunga block in Indonesia. The exploration will continue until 2029.

*Pertamina Hulu Energi (PHE): A subsidiary of Indonesia’s state-run oil and gas company Pertamina.

Q What is the capacity of the Gwangyang LNG Terminal operated by POSCO International?

POSCO International began the operation of Korea’s first private LNG terminal in 2005. The company stores imported LNG at the Gwangyang LNG Terminal and uses it for facilities such as POSCO’s steel mills and its LNG Combined Cycle Power Plant.

▲A view of POSCO International Gwangyang 1st LNG Terminal, which was completed on July 9, 2024.

The Gwangyang LNG Terminal 1 currently has six tanks with a storage capacity of 930,000 kℓ. In January 2023, construction of the Gwangyang LNG Terminal 2 began, with plans to add two new tanks (Nos. 7 and 8), each with a capacity of 200,000 kℓ, by 2025. When completed, the terminal will boast a total storage capacity of 1.33 million kℓ with eight tanks, securing its position as the number one private LNG terminal in Korea and the 11th largest worldwide.

Furthermore, in August 2020, POSCO International became Korea’s first certified LNG supplier for vessels and began providing its initial LNG supply to international shipping companies. It is also actively advancing its LNG bunkering business by establishing dedicated infrastructure to supply LNG fuel to marine vessels. POSCO International plans to build a dedicated bunkering infrastructure at the Gwangyang LNG Terminal to stably supply low-carbon fuel to ships, thereby revitalizing the domestic LNG bunkering market and actively responding to international environmental policies.

Q How is the natural gas stored at the Gwangyang LNG Terminal connected to daily life?

In Korea, Korea Gas Corporation (KOGAS) exclusively installs and manages the national gas supply pipeline network, which spans approximately 4,937 km. This network serves as both a transportation channel and a storage system for natural gas. The Gwangyang LNG Terminal converts LNG into natural gas and measures the amount before introducing it into the KOGAS pipelines. Once introduced, the power plants in Incheon withdraw the measured amount of gas for use.

While domestic regulations prohibit the direct sale of LNG gas to third parties in Korea, POSCO International is actively pursuing LNG trading through its Singapore trading subsidiary. In 2023, it traded 2.12 million tons of LNG, equivalent to 4% of Korea’s annual LNG consumption. The company plans to expand its trading volume to 3.57 million tons by 2025.

Q What lies ahead for the global LNG market?

The global LNG market is poised for steady growth, largely due to Europe’s push to replace pipeline natural gas (PNG) and the ongoing shift to greener energy solutions. Qatar, one of the world’s top LNG exporters, has announced that it plans to expand its annual production capacity from 77 million tons to 142 million tons by 2030. Meanwhile, the second term of the Trump administration is anticipated to maximize natural gas production and exports by easing regulatory restrictions on shale gas production and LNG exports.

The Russia-Ukraine conflict has accelerated Europe’s adoption of LNG as a substitute for Russian PNG. For example, despite Germany’s policy of expanding renewable energy, it has recently completed an onshore LNG terminal to secure infrastructure for importing LNG to replace Russian PNG.

In its annual market outlook last August, global energy giant Shell projected that global LNG demand could rise by 50%, reaching between 625 million and 685 million tons by 2040. As we enter a period of global energy transition, we expect LNG to play a key role as a fuel.

When it comes to energy, the first things that come to mind would be fossil fuels, coal and oil in particular. These two most common energy sources aren’t considered Sustainable. On the contrary, the next most frequently used energy source is Liquefied Natural Gas (LNG), and this is referred to be Sustainable!

l Liquefied Natural Gas Emerging as a Major Energy Source

Do you know anything about LNG? I heard that LNG is made by liquefying natural gas and also that this LNG will become the next generation energy source. Am I right?

Yes, you are right. At present, there are many POSCO’s customers engaging in the LNG industry, ranging from LNG vessels, LNG tanks, to LNG equipment. And they strongly insist that LNG will become the next ‘major’ energy source. In fact, the International Energy Agency (IEA) announced that, in the future, LNG will overtake coal as the second dominant energy source following crude oil. In 2019, the global demand for LNG reached 359 million tons, a 12.5% increase compared to 2018, and some predict that it will increase to 700 million tons by 2040.

What is the reason for all this?

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What matters are environment and safety. These days, we are slowly getting rid of products and technology that aren’t Sustainable. Coal and crude oil — the most commonly used energy sources — are fossil fuels and emit fine dust (PM 2.5), sulfur oxides (SOx), and nitrogen oxide (NOx) when utilized. Hence, both energy sources are far from being Sustainable. In the case of nuclear power plants, safety became an issue after the Fukushima nuclear disaster. Of course, there are other renewable energies like wind and solar power, but they are still insufficient to replace fossil fuels entirely.
In the case of LNG, dust, sulfur, and nitrogen are removed during the liquefaction process, so when it is burned, pollutants can be significantly reduced compared to other fossil fuels. It is also lighter than air, so in case of a leakage, it can be blown away easily. The chances of an explosion are also low since its ignition temperature is high. Those are the reasons why LNG has been spotlighted these days.

l LNG, How Helpful Is It to the Environment?

I heard that demand for LNG-powered vessels has increased dramatically in the shipping industry because of the new regulations issued by the International Maritime Organization (IMO) 2020. I guess that is why?

You know that EV, hydrogen cars, and hybrid vehicles are popular these days, right? But did you know that the amount of SO₂ emitted by the top 15 large vessels adds up to more than all vehicles combined worldwide? No wonder why the transition from bunker fuel-powered vessels to LNG-powered vessels is in progress.

Then can you compare the environmental impact of LNG-powered vessels and bunker fuel-powered vessels? I want to check whether LNG is indeed Sustainable.

OK! Let’s take the ‘Green Iris’ vessel, propelled by LNG, as a model vessel and compare the two following cases: a) when operated on LNG with a fuel tank made of 9% nickel steel, high manganese steel, and b) when operated on conventional bunker fuel with a fuel tank made of regular steel plate.
Let’s suppose that the vessel takes a round trip from Busan Port to the Port of Singapore once a month for 25 years. The environmental impacts include not just the operation period but the manufacturing stage with 9% nickel steel, high manganese steel, and regular steel plate as well. Setting the conventional bunker fuel as 100%, let’s take a look at the level of acidification, global warming, and resource consumption of LNG.

Wow. The acidification effect of LNG-powered vessels is almost halved compared to that of bunker fuel-powered vessels. While the level of global warming and resource consumption goes down to 73% and 64%, respectively.

Can you see how beneficial it is to use LNG in the long run? The main reason why regulation was enforced on bunker fuel is because of SOx, and, in LNG, the amount of SO₂eq emission — including SOx — is slashed to 630 tons, the half of 1,220 tons emitted by the bunker fuel scenario’s.

SOx? Doesn’t it precipitate fine dust? So, utilizing an LNG-powered vessel can help reduce almost 600 tons per ship!

Also, the emission of greenhouse gases (CO₂eq), such as carbon dioxide, a major cause of global warming, amounted to 360,000 tons in the bunker fuel scenario and 264,000 tons in the LNG applied scenario. It shows that an LNG-powered vessel can reduce carbon dioxide emissions by about 90,000 tons compared to a bunker fuel-powered vessel. Imagine that this 90,000 ton is discharged into our planet. One pine tree can absorb about 6.6 kg of carbon dioxide per year, so 90,000 tons is equal to the amount that can be absorbed by 13.6 million trees for a year.

What? 13.6 million trees? That’s a LOT. Then, what is this resource consumption impact?

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Resource consumption indicates the degree of natural resources depleted due to the consumption of fossil fuels. The index is not simply based on how much natural resource is consumed quantitatively, but it also takes into account how many of these natural resources remain. Hence, it could provide us with information beforehand so that no excessive resources are consumed. The higher the number, the greater the degree of depletion. And as demonstrated here, LNG has less impact on resource consumption than bunker fuel.

l LNG, How Helpful Is It to the Environment?

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If LNG is that good, why do we keep using coal and oil until now?

That’s because we lacked the technology to apply it. A downside of LNG is that its liquefaction process, transportation, and storage are quite tricky. Since LNG required enormous investment to create a value chain such as processing and transporting, it did not receive much attention in the past. Natural gas needs to be cooled down to below -163 degrees Celsius to become LNG. And it took quite a long time to develop technologies and materials suitable for this condition.

You mean that we produce the gas in gas fields, liquefy, and use it in liquid form? I heard that the city gas we use is LNG, but isn’t this in gas form?

Well, the supply chain of LNG is quite complicated. First, the natural gas produced at gas fields is shipped to the LNG liquefaction plant via pipeline. Here, the gas is liquefied and formed into LNG. This LNG is then transported with a specialized vessel called an LNG carrier, and when the LNG arrives onshore, it is stored in the LNG storage tanks at the LNG terminal, where it is vaporized into gas once again. Finally, it is sent to power plants or city gas companies through a pipeline.

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Wow. I didn’t know that LNG goes through so much before we get to use them. So I guess it requires advanced technology as well?

Yes, it does. The core technology is about tank design. And among other things, the material would be the most crucial part. The first LNG plant to be built on a commercial scale was the Cleveland plant in the U.S. in 1941. However, the plant was shut down in 1944 due to the destruction of the LNG tank during operation. The material used in making the LNG tank was known to be vulnerable to low temperatures, and it was one of the reasons why the LNG tank was damaged.

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I guess research on LNG tank materials wasn’t active back then. So we need a material that is strong enough to be used at very low temperatures.

When you apply force to an object, it withstands to a limit, deforms, and eventually breaks. Most materials become weaker at low temperatures. You must have seen that when an object quickly freezes, it tends to break easily. When LNG is unloaded and stored, its temperature changes rapidly — ranging from room temperature to below -163 degrees Celsius. And of course, the LNG tank should be able to withstand such dramatic temperature changes. Also, the material should have excellent machinability and be cost-efficient so that it can be fabricated into the desired structure.

Then we cannot use normal steel to make LNG tanks, right? What should we use then?

This is where POSCO’s steel solution steps in! Let me introduce you to the details from now on.

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☞ See [GPS] #2 POSCO’s Solution for the LNG Industry! (ep.2)

Besides utility managed solar farms, solar developers are targeting other open spaces, such as auto parking lots, for large-scale energy savings (Source: Phys.org)

The surge in these installations is prompting a parallel upswing in solar infrastructure, which is seeing its own technology advances as a result of high demand and the need for greater cost efficiencies. While sturdy racking is important to protect against the ravages of nature, one of the main requirements for large solar farms — and any larger installation — is solar tracking equipment.

Solar tracking offers grid operators the opportunity to squeeze efficiency from sunlight at all hours of the day. While fixed-panel arrays are highly efficient for general-purpose energy harvesting, single-axis solar tracking can increase a solar farm’s annual output by roughly 30 percent. Dual axis trackers can add 10-20 percent beyond that. For example, air mass tables for solar panels show that a panel mounted on a tracker can harness as much as 60% of solar intensity in the late afternoon at an angle of 15 degrees, 50% at 10 degrees, and capture 25% at a mere five degrees. In large installations these gains can mean the ability to respond with enough power to satisfy peak demand.

Solar tracking systems explained

A solar tracking system is used for a variety of applications. Depending on the applications, the mounting systems will differ somewhat. Typically solar trackers hold single or multiple standard flat panels, arranged in rows and funneling power to an energy storage site or directly to a substation.

Parabolic mirrors can focus sunlight onto solar collectors. (Source: EU Solaris)

However, solar trackers are critical for large-scale solar installations using concentrated solar power (CSP). These trackers hold mounted mirrors that reflect sunlight to a central collector tower containing hot liquid or gas. They are also a key element in concentrator photovoltaic (CPV) installations that use parabolic mirrors or lenses to focus sunlight (and even ambient light from the sky) into solar collectors that are part of each unit. These panels and mirrors require precise angles to enable optimized concentration of the light onto a fixed-location tower, into Fresnel lenses, or into a solar thermal collector. The tracking system may be centralized, where a single motor moves many rows of panels at once, or a distributed system, where an individual motor moves one row or table of panels.

Horizontal single axis trackers (pictured above) are better suited for lower latitudes. (Source: Energia Solar)

Solar tracking devices can be classified by the number of axes around which they rotate and by their orientation. Horizontal single axis trackers (HSATs) are horizontal to the ground and mounted on rotating tubes supported by pylons or frames. Horizontal single axis trackers with tilted modules (HTSATs) are similar but installed at an angle, for higher latitudes, but rotate the same way. Vertical single axis tracker (VSAT) panels, also for higher latitudes, rotate around a vertical axis, but the layout must be designed to prevent the rows of panels from casting shade on each other. A hybrid horizontal/vertical tracking system is referred to as a tilted single axis tracker (TSAT).

A tilted single axis tracker is a hybrid of horizontal and vertical tracking systems. (Source: The University of Queensland)

In addition to the panels or mirrors, tracker hardware may include steel posts or rails, cables, junction boxes, slew drives to rotate the panels, and hydraulic dampers to provide flexible resistance against the wind. The structures must be robust, well-anchored, easily transported and installed, and must be able to withstand the elements, including hot or cold locations, strong storms, heavy rain or snowfall, and even seismic activity.

Perceptions of solar tracking

For a time, solar tracking for large-scale installations had a reputation as a more expensive and maintenance-intensive technology despite the higher energy capture rates. Some of these reliability perceptions still linger. In actuality, according to Greentech Media, solar tracking systems boast a 99.9 percent uptime rate and advances continue in mechanical functionality and software-based optimization. In fact, the U.S. Energy Information Administration reports that of all utility solar projects constructed in the US in 2016, 79% used solar tracking rather than a fixed panel.

Advances in solar tracking

Despite being perceived as a less exciting infrastructural component of the solar industry, solar tracking has seen a number of technological and mechanical breakthroughs that promise increased growth due to lower costs and increased weather resistance.

One of the challenges is the economics of land use and site preparation. Until recently, utilities and third-party solar farm developers had to plan carefully to ensure that the needed amount of power could be generated from a particular site size given solar tracker configurations (e.g. HSAT vs VSAT). Additionally, they had to take into consideration the site contours and how much grading and preparation would be required to adapt the site to optimized solar tracker deployment. As a result, there has been stiff competition for flat sites.

Utilizing slopes and rolling terrain

In California, a company called Nevados Engineering is on the verge of launching single axis trackers designed to work on south-facing and sun-facing slopes and varied terrain, which offer better solar exposure. The company’s All Terrain Tracker (ATT) technology uses unique bearings that allow articulation with the driveline so it can fit the terrain using the same kind of posts as on flat land. Every post in the row is used to withstand the slope load, which is the toppling force exerted by the structure being pulled down the hill by gravity. The tracking units can handle slopes of over 20 degrees and can also handle side-to-side, and vertical, post misalignment of up to two feet. The advance vastly reduces the need for grading and landscaping, enabling solar developers to purchase significantly cheaper sloped or contoured terrain to maximize solar energy capture.  The company’s software enables developers to predict solar production for a site to calculate the economics.

Nevados Engineering’s All Terrain Tracker technology and help install solar trackers in all kinds of terrains. (Source: LA Cleantech Incubator)

“We need to look beyond what we expect solar trackers to do,” said Yezin Taha, CEO of Nevados Engineering. “Installing trackers on a slope can capture 7% more solar energy than trackers on flat ground, and 32% more energy than fixed tilt systems.”

Leveraging non-standard sites

Another recent development, floating ground mounts, has also made more large-scale solar sites available. While most solar trackers are mounted on posts that are driven directly into the ground or less frequently, on posts that use concrete foundations or ballast, certain kinds of terrain won’t support driving posts or invasive concrete structures. These sites, such as capped landfills, can be highly suitable for solar installations due to their height, restricted access, and unsuitability for other uses. The development of floating ground mounts, where the tracker is placed on a gravel pan that can be filled with a variety of materials, has made possible the use of these kinds of sites where posts can’t be driven.

Resisting the elements

Advances in resistive materials also show promise for the solar tracking industry. Posts and other tracking components are typically made of galvanized steel, which means they are coated with a high zinc content layer. Galvanization has been the most weatherproof and anti-corrosive solution to-date, but it still allows rust to form over time. Moisture can be an electrolyte that enables galvanic corrosion to occur, so that as humidity increases, the rate of corrosion increases. Also, atmospheric contaminants can catalyze the chemical reaction. Chlorides in marine environments, as well as and sulfur dioxide and nitrous oxides in industrial locations, may present a higher risk of corrosion.

Recently steel companies such as POSCO have begun to add magnesium to the coatings for further protection, a process that had been prohibitively complex until now.  POSCO’s PosMAC is a combination of zinc, aluminum and magnesium that “heals” any exposed parts of the steel by forming a layer of simonkolleite, a stable compound, over the vulnerable area. The development promises greater ruggedness and durability for tracking components.

Streamlining operations and maintenance

Finally, the advent of sensors, drone-based inspections, and the Internet of Things (IoT) will have a growing impact on solar farm operational costs by enabling remote monitoring, hardware predictability, just-in-time replacement and streamlined functioning. An operator in Germany could easily determine when to clean the solar panels in a Dubai installation after a dust storm or know when a tracking mechanism becomes jammed.

Solar tracking mechanisms can be monitored easily with the help of artificial intelligence. (Source: Micro Power Grids)

These advances, coupled with the cost efficiencies of solar and the increasing availability of grid-level energy storage solutions, will continue to boost the utility-scale solar energy market and take market share from fossil fuel power plants. The expansion of solar power offers a significant opportunity for multiple industries, from materials providers to solar panel manufacturers, tracking system component manufacturers, sensor distributors, battery makers, software developers and even drone suppliers. By leveraging the confluence of these technologies each industry can ensure that they participate in the solar market’s return on investment.

Tom Breunig is the publisher of Cleantech Concepts, an online magazine and market research firm tracking cleantech R&D and innovative business models.

The U-Shaped Relationship

However, the argument is not so black and white according to Spyridon Stavropoulos, Ronald Wall and Yuanze Xu’s Environmental regulations and industrial competitiveness: evidence from China. The study suggests that the relationship between stringent economic regulations and industrial (or economic) competitiveness is U-shaped. Meaning, initially, stringent regulations will increase the cost of production and make companies less profitable, but after a certain turning point, companies will be forced to adapt and innovate, thus becoming more competitive in the long run.

Many activists sit on both sides of the debate. (Source: Ethical Shopper)

When regulation policies are consistent over a long period of time, companies are forced to tackle the root of the problem, instead of focusing on meeting certain numbers. In today’s global economy, many governments have already begun to implement stringent economic regulations that only look to get tighter in the future. In such a context, companies that choose to innovate and come up with solutions to global pollution problems will come out more competitive in the end.

Sustainability Equals Competitiveness

Looking at major economic players around the world, it’s safe to say that environmental sustainability is a common topic on each of their respective national agendas. Pressing national challenges are tied to the environment in one way or another. For example, many countries are shifting their policies to ensure energy security. Countries that import most of their energy from external regions are subject to volatile prices and thus unstable economies. Thus, governments are actively supporting companies that can cultivate domestic, renewable energy sources. Another, more obvious, example is the direct link between pollution and health risks.

China is the fastest developing country in the world, and by 2035, it will be responsible for 28 percent of the total global energy demand. China also happens to be almost completely dependent on energy imports. Subsequently, the government has started a variety of government programs to boost sustainability as part of President Xi Jinping’s pledge to build a “Beautiful China”. These policies also come in the wake of shocking statistics: in 2015, pollution led to 1.8 million premature deaths in China.

Chinese President Xi Jinping laid out a 2-step plan to achieve a “Beautiful China.” (Source: News Gru)

Sustainable Steelmaker

Even with strong government commitment and plenty of programs to support sustainable business, most developing countries lack affordable renewable energy sources and the technology to apply those sources to existing production processes. Nevertheless, the world is changing and only those that adapt and innovate survive and thrive. That’s exactly what POSCO did starting back in 2007.

FINEX: A Game Changer

POSCO came up with a new molten iron production technology called FINEX. The technology allows molten iron and non-coking coal to be produced directly in a blast furnace during the iron-making process. It is different from the conventional blast furnace process, as it combines the coking plant, sinter plant and blast furnace into a single iron-making unit. This lowers production costs and reduces harmful emissions.

FINEX is a sustainable game-changer for steel production.

Ultimately, FINEX is one of the most cost-effective and eco-friendly ways to make steel. The technology mitigates the use of C02, has the lowest process-related emission rates and preserves resources through the use of a wide range of iron ores and non-coking coals. FINEX reduces SOx and NOx emissions by 40 and 15 percent respectively, and fine dust particles can be reduced by 34 percent compared to traditional blast furnaces. Furthermore, the by-products from the process generate highly valuable export gas that can be used for various purposes like electric power generation or natural gas substitution.

On December 7, 2017, POSCO reached 20 million cumulative tons of molten iron production using the FINEX technology. POSCO is not the only company enjoying the benefits of sustainable competitiveness – POSCO’s manufacturing partners can see lower emissions levels when evaluating the entire life cycle of their products.

SEE ALSO: POSCO Reaches 20 Million Tons of Production Using FINEX Technology

Sustainability is no longer just jargon. As environmental issues are intricately tied to the economy and even national security, governments around the world will be actively supporting sustainable companies in the years to come. Companies can expect sustainability and competitiveness to become interchangeable terms in the near future.

Consider some of the bigger shifts in the US energy industry:

The Shale Revolution

The “shale revolution” has impacted the entire energy system in the US and worldwide. Although the elements of horizontal drilling and fracking had been known for decades, it was the entrepreneurial genius of men like George Mitchell of Houston who found the way to link these technologies and apply them commercially. It resulted in the US going from a natural gas importer to an exporter of pipeline gas and LNG, an exporter of oil (but not a net exporter), and the collapse of prices for gas, LNG, oil and oil products. It reverberated throughout OPEC countries and other major producers like Russia, as well as in major importing countries. It also enabled oil and gas producers to reduce their footprint overseas and focus on domestic production opportunities.

The “shale revolution” has impacted the entire energy system in the US and worldwide. (Source: Bloomberg Business)

Coal Industry

Coal, which had been king in the middle of the last century, has been declining rapidly, losing market share to often cheaper natural gas. The improbable opportunity to ship coal to Germany provided some relief. The Trump Administration may have won the election by making promises to US coal-producing states, but having an impact on this declining industry will take more than rhetoric. While much attention has been given to anti-coal regulation it has been market forces that caused electricity producers to shift from coal to natural gas.

Nuclear Energy

Nuclear energy faces the twin threats of obsolescence, as well as competitiveness with natural gas. The regulatory system also contributes to its decline. Many of the roughly 100 nuclear facilities operating in the US were built about 40 years ago, which means that they were due for major upgrades or retirement now. Only a few new plants are under construction, and they are massively over budget and have been built only in states with regulatory systems in which consumers must bear the cost of such overruns. Conventional wisdom had been that these plants would be upgraded and run for decades more. Instead several have announced shutdowns, and more are expected to follow. Nuclear had been considered a low-cost base fuel, but has trouble with competing with natural gas at current prices.

U.S. President Donald Trump and Secretary of Energy Rick Perry (Source: Fortune)

Energy policy in the Trump Administration, led by Secretary of Energy Rick Perry, is trying to protect both coal and nuclear because of their important role as baseload producers, in contrast to wind and solar that cannot provide consistent power to the system. But it seems doubtful that regulatory mechanisms will overcome market forces.

Falling Prices

The collapse of oil and natural gas prices led to the elimination of hundreds of thousands of jobs worldwide and slashing capital budgets, especially for higher-cost production such as deepwater, the Arctic, and other frontier environments. The shale play was led by small independent companies, but many of them took on too much debt, spent too much money to buy leases from mineral-rights owners, and drilled but often didn’t complete wells because of a focus on future growth. A number of them have failed financially or sold off properties. Even giants like BHP Billiton, which entered the US shale market with a USD 20 billion investment, wrote off USD 13 billion within six years. Although there continues to be substantial financing available from Wall Street, the focus has shifted from growth to cash flow. This has important implications.

But cheaper natural gas has had a positive impact in four areas:

Natural Gas and Oil Pipeline Projects

Natural gas and oil pipelines (midstream) have had a resurgence of activity, both proposed and built. To be sure there have been and continue to be strong challenges by environmental organizations. However, many pipelines have gone forward and others have been suspended because of economics rather than protest.

The U.S. went from an importer to an exporter of liquified natural gas. (Source: The Globe and Mail)

New LNG Facilities

LNG exports are a new phenomenon for the US. For years the US faced a deficit in natural gas, leading to proposals for nearly 40 LNG import facilities. Fortunately, most of them were not built, and those that were have largely become LNG export terminals. These required massive capital investment across the value chain. Greenfield facilities are now planned or under construction in multiple locations.

Expansion of Pipelines to Mexico

Pipeline gas to Mexico is little noticed by the public but the expansion has been dramatic. Despite the liberalization of the energy system in Mexico the demand for natural gas for industry and consumers, especially in Northern Mexico, is likely to continue. There is even talk about an LNG export terminal in Mexico’s Baja peninsula, to be supplied from US sources. The shadow over this is anti-immigrant policies of the Trump Administration and uncertainties related to the renegotiation of the NAFTA trade agreement. There is concern that the upcoming Presidential election in Mexico will result in an anti-US tide that might impact progress on the energy value chain.

Resurgence of the Petrochemical Industry

The petrochemical industry in the US has had a resurgence with low-cost natural gas. Approximately USD 100 billion of investment is currently underway or recently completed in the Texas and Louisiana Gulf Coast.

What we see here are currents moving in very different directions in the extended and complex energy supply chain in the US and internationally.

What does this mean for the steel industry?

Pipelines

Steel is literally the backbone of the US oil and gas system. Hundreds of thousands of miles of pipelines form a complex web across the continental US, in Alaska, to Canada and Mexico, and out to the Gulf of Mexico. Though mostly unseen, these pipelines enable the production and consumption of resources reliably and at affordable prices. New activity will be limited in the Gulf of Mexico for some time, with most of it focused on completing projects that were already underway. There may be some new activity in Mexican waters in the Gulf as the political opening there results in development, much of it in proximity to known fields on the US side of the border.

For example the Keystone XL pipeline, planned to bring more heavy oil from Canada, has been contentious for years for a variety of reasons including the higher carbon content of the crude and the route of the pipeline. Opponents have recently adopted a new strategy suggesting that the project is no longer economic – this is a way to undermine political support. TransCanada, the developer, insists that it is viable and on track. However, in Canada itself, plans have been abandoned for a massive oil pipeline to connect the producing area of Alberta in Western Canada to the east coast.

The Keystone XL pipeline was planned to bring heavy oil from Canada to the U.S. (Source: Horizon Supply Company)

Platforms

The offshore industry has been a major user of steel, both for platforms often built in Korea, and also for the related supply chain. Capital investment has been hardest hit in this area, and may not resume for 3-5 years until global demand increases and production growth slows.

LNG Facilities

LNG is a relative bright spot. The value chain includes the production of gas, transportation to newly-built liquefaction facilities, LNG ships, and import/regasification facilities. Lithuania recently built an LNG import facility to promote its independence from Russia. In other cases, majors like Shell, are now discussing building infrastructure in countries as diverse as South Africa and Vietnam so that they can become gas users. Japan shut its nuclear facilities after Fukushima and has been slow to reopen them. It lacks a domestic pipeline system because of the mountainous terrain and has relied on two dozen LNG import terminals. Will that create demand for new facilities?

An interesting twist is that Kinder Morgan, a leading pipeline company, has defined itself more broadly as an energy transfer organization. It had been frustrated in trying to build a natural gas pipeline from the Marcellus field in Pennsylvania to Boston, where natural gas prices are often the highest in the US. So they have decided to build LNG vessels to transport gas from terminals in Louisiana and Texas to Boston, despite restrictions imposed by the protective Jones Act that requires US vessels and crews for transport between US destinations.

LNG vessels transport LNG between terminals. (Source: World Maritime News)

Shale Gas Wells

The US shale play has been compared to a manufacturing process. Traditional development wells were expected to produce gas for years and oil sometimes for decades. But the fracking operations have a rapid decline curve which means that companies are constantly drilling new horizontal wells and are doing so for greater lengths. More than a dozen horizontal wells may stretch from a single pad. Budgets are now focused on cash flow, which means spending less on acquiring leases and more to produce oil – this results in more spending on steel.

Crude Oil Vessels

The US is now exporting about 2 million barrels of oil per day. US producers had been largely banned from exporting oil until two years ago when outdated legislation was changed. Increased domestic production and the ability to export dramatically changed shipping patterns. Nigeria had been a major exporter to the US but has forfeited the market. Saudi Aramco bought out Shell’s interest in the Motiva joint venture and took complete control of the Port Arthur refinery, the largest in the US. Many observers believe this was to assure a market for Saudi crude. Thus increased trade in oil and shifting markets may create demand for new vessels.

Petrochemical Facilities

Finally, low-cost natural gas has been a constant in the US. In addition to the new construction of petrochemical facilities along the US Gulf Coast mentioned previously, it adds the potential for a reindustrialization of the US economy that was unimaginable just a few years ago. This can cut across many industries for which power costs are a major factor. This may seem inconsistent with e-commerce, but the two may go together as mega distribution centers are built so that a growing fleet of trucks can provide same-day delivery to consumers.

There are many paradoxes in the American energy system and supply chain. For the steel industry, the key is to determine where those opportunities are located.

Bill Arnold is a professor in the practice of energy management at Rice University’s Jones Graduate School of Business. Previously, Arnold was Royal Dutch Shell’s Washington director of international government relations and senior counsel for the Middle East, Latin America and North Africa for 16 years.

Cover photo courtesy of Petroleum Economist.

Jong-sub Lee, executive VP of POSCO (third from right) explains POSCO’s products to Young-jin Kwon, Mayor of Daegu Metropolitan City (fourth from right) and Young-doo Kim, VP of Korea Gas Corporation (second from right) at the POSCO exhibition booth.

The Asia Pacific Gas Conference is the only gas-related international conference in Korea, first held in 2015. This year, under the theme of natural gas in the future energy market, more than 100 domestic and overseas companies participated, and showcased new technologies and products.

POSCO promoted its high manganese steel, 9% nickel steel, stainless steel and POSCO E&C’s LNG Terminal design and construction technology during the event.

The exhibition space at this year’s event was divided into Product, Solution, PR and Business zones, and on display were steel products related to LNG carriers, high manganese steel LNG storage tanks and onshore LNG storage tanks. In addition, visitors were able to experience the production of POSCO GIGA STEEL and POSCO’s smart via VR videos.

The conference covered topics such as the natural gas industry’s development plans, natural gas and LNG infrastructure as well as new transportation and storage technologies. POSCO also presented a case study of high manganese steel development and production during the part of the conference focused on new material solutions for the LNG industry.

Visitors to POSCO’s exhibition booth watch VR videos about the steelmaking process and the qualities of POSCO GIGA STEEL.

POSCO was able to take away key insights on the recent and future trends of the gas industry, create new business opportunities with potential customers and expand its business with existing customers during the conference. With the new-found knowledge and partnerships, POSCO will work to find more customized and innovative solutions for its partners in the gas industry.

Cover photo courtesy of APGC 2017.

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