SK Energy and POSCO will invest in Clean Coal Conversion, to convert coal to Synthetic Natural Gas (SNG), Coal to Liquid (CTL), and Chemicals, to reduce its oil and gas imports and improve the energy security. This project is supported by the S. Korea Government.

With total investment of 3.35 trillion won (2.6 billion USD), this project will be conducted by two stages. POSCO will invest 1 trillion won and SK will invest 2.35 trillion won.

In the first stage, POSCO will invest 1 trillion won to develop related technologies and build a SNG plant in Gwangyang, south of S. Korea, which is expected to start up before 2013 with proposed annual SNG capacity of 500,000 ton (around 700 million Nm3). POSCO estimates that its products will replace annual imports of 200bn won of Liquefied Natural Gas (LNG). Also, SK Energy will invest 550 billion won through 2013, to develop CTL technologies and build production facilities in Ulsan, Southeast of S. Korea. The plants will produce annually 200,000 ton of chemicals including methanol and hydrogen, and to replace petrochemical feedstock naphtha.

In the second stage, from 2014 through 2018, SK Energy will invest 1.8 trillion won to build a CTL plant with annual capacity of 6.3 million barrels of gasoline, or about 2.5 percent of Korea''s fuel demand for transportation in 2008. The plant will be set up near a low-cost coal mine overseas.

Besides, the S. Korea Government has set aside separate financing of 25 billion won for the research and development initiatives of POSCO and SK Energy projects. The Government believes that the technologies could make it possible to turn low-quality coal into a clean energy source, which could be licensed abroad, would help South Korea enter the global energy market in the future.

According to the data from ASIACHEM Consulting, S. Korea is now the fifth Crude Oil importer and the second LNG importer in the world, the country imported Natural Gas at 37 billion Nm3 in 2008. An analyst from ASIACHEM said, the Government supporting two major firms into SNG and CTL industry reflects the significance of Clean Coal Technologies in S. Korea energy strategy, which also means the Korean firms has controlled abundant and cheap coal resources.

SK Energy is the Top1 refinery, POSCO is the Korean largest and worldwide sixth steel manufacturer. Ulsan is a main refining and petrochemical base of SK energy, while Gwangyang is a major coke production base for POSCO.