South Korea’s energy and petrochemical sectors are facing pivotal moments as high-stakes negotiations, government policies, and shifting market realities collide. With the country’s ambitious push toward renewable energy and a simultaneous need for industrial restructuring, the coming months could reshape the nation’s industrial landscape in ways both dramatic and far-reaching.
On the renewable energy front, Equinor’s 750-megawatt Firefly floating wind farm—known locally as Bandibuli—off the coast of Ulsan has hit a critical snag. According to EnergyPulse of the UK, the project failed to meet the September 3, 2025 deadline to sign Renewable Energy Certificate (REC) agreements with the country’s largest power producers, the Renewable Portfolio Standard (RPS) suppliers. This missed deadline threatens not only the withdrawal of government-backed financial support but also a five-year ban on bidding in future support rounds. That’s a hefty price for any major energy player.
The Firefly project, which had secured a coveted REC award in 2024, is now in limbo. Equinor, the Norwegian energy giant behind the venture, is actively negotiating with South Korea’s Ministry of Trade, Industry and Energy, seeking an exemption. The company cites changes in the business environment as well as technical and commercial factors that have complicated the process. The stakes couldn’t be higher: with 750 megawatts of floating wind capacity at risk, the outcome could have ripple effects for South Korea’s clean energy ambitions.
There’s also a local angle to the Firefly saga. Korea Hydro & Nuclear Power and Korea Midland Power, two domestic heavyweights, are reportedly considering taking stakes in the project. Such a move could provide much-needed stability and local support, especially as the project has already lined up a roster of prominent suppliers. Turbines from Doosan Enerbility and Siemens Gamesa, each rated at a powerful 15 megawatts, are slated for installation. Samsung Heavy Industries is on board for the semi-submersible foundations, Ekwil is providing semi-sub technology, and both LS Cable & System and LS Marine Solution are responsible for the submarine cables and their installation.
But the challenges facing South Korea’s energy sector aren’t limited to renewables. In the heart of the country’s storied petrochemical industry, a parallel drama is unfolding. On September 11, 2025, SK Geo Centric—a major petrochemical subsidiary of the SK Group—announced a temporary suspension of negotiations with Korea Petrochemical Ind. Co. (KPIC) over the sale of its naphtha cracking center (NCC) in Ulsan. The talks, which began last year, have been fraught with complications and have now ground to a halt, at least for the time being.
"The negotiations have not completely broken down," an SK official told EnergyPulse, emphasizing that both parties are "re-adjusting their internal positions." The original plan was for SK Geo Centric to sell its NCC facilities to KPIC, but as discussions progressed, the possibility of operating the facility as a joint venture gained traction. Under this scheme, both companies would share ownership, with KPIC managing the integrated operations. Yet, for all the creativity in deal structure, the talks have stumbled on divergent interests and risk appetites.
SK Geo Centric, with its relatively robust finances, feels little urgency to rush into restructuring, especially as the broader petrochemical industry shows tentative signs of recovery. KPIC, on the other hand, faces a tougher financial picture: it reported a loss of 14.4 billion won in the first half of 2025 and holds cash and cash equivalents of about 93 billion won. With resources stretched thin, KPIC is understandably wary of making a large investment in facilities that can’t be immediately put to productive use—even under a joint venture model.
Yet, the story doesn’t end with these two companies. The restructuring of Ulsan’s petrochemical complex is increasingly seen as a multi-player affair. S-OIL, another major industry player, is set to bring its new crude oil to chemicals (COTC) facility online by the end of next year. This will boost its ethylene production from 200,000 to a staggering 1.8 million tons annually, making S-OIL the largest producer in the region. As one industry insider put it, "Ulsan’s restructuring involves not just these two companies but also S-OIL, which will produce 1.8 million tons of ethylene next year." With such a major shift in market dynamics looming, it’s little wonder that negotiations have become more complex, with calls for S-OIL to join the table growing louder.
While Ulsan’s restructuring efforts remain mired in caution and calculation, things are moving more briskly behind the scenes in Yeosu and Daesan, two other major petrochemical hubs. In Yeosu, LG Chem and GS Caltex are reportedly in advanced talks to create a joint corporation that would integrate their NCC operations—part of a government-promoted strategy to vertically integrate oil refining and petrochemicals. There are even rumors that the two companies have already presented their integration plans and implementation process to government officials, though nothing has been confirmed publicly.
Daesan, meanwhile, is seeing its own flurry of activity. Lotte Chemical and HD Hyundai Chemical, operators of NCCs with capacities of 1.1 million and 850,000 tons, respectively, are discussing merging their operations under the Hyundai Chemical banner. There’s even talk that LG Chem could be brought into these negotiations, further complicating an already intricate web of alliances and rivalries.
Despite all this movement, there’s a growing consensus within the industry that government action—or rather, the lack thereof—is hampering progress. The government’s hands-off approach to business restructuring has left companies “overly cautious,” according to industry experts quoted by EnergyPulse. Many are calling for institutional support to smooth the path for consolidation and adaptation. Suggestions include tax breaks to reduce the burden of transfer taxes when facilities change hands and temporary relaxation of antitrust laws to facilitate mergers that might otherwise run afoul of competition regulations.
“Even if a company scraps facilities for the public purpose of reducing oversupply in Korea, it must bear all the costs of demolition and environmental cleanup,” a high-ranking industry official lamented. “Support is also needed for companies that have to purchase facilities they can’t immediately operate.” The message is clear: without meaningful government incentives and regulatory flexibility, the restructuring needed to keep South Korea’s petrochemical sector competitive may remain out of reach.
As the country stands at this crossroads, the interplay between bold renewable energy ambitions and the gritty realities of industrial restructuring will test both policymakers and industry leaders. The coming months will reveal whether South Korea can align its vision for a cleaner, more efficient future with the practical needs of its most crucial industries.