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[#WeFACE] ‘Gas stations will disappear, but not their social roles’


Hyundai Oilbank head of sales and marketing Han Hwan-kyu (Hyundai Oilbank)
Hyundai Oilbank head of sales and marketing Han Hwan-kyu (Hyundai Oilbank)

The Korea Herald is publishing a series of interviews with executives of South Korea’s leading corporations on their response to environmental, social and corporate governance, or ESG, issues, which have become central factors globally in measuring the sustainability of an investment or business decision. -- Ed.
 

One electric vehicle charger installed at a service station in Seoul generates no more than 100,000 won ($88.1) in revenue per month. After electricity bills are paid and fixed costs are deducted, it’s safe to say that EV chargers yield almost no profit.

For Hyundai Oilbank, one of the four major refineries in South Korea with more than 300 pump stations nationwide, keeping up with the global EV transition is painful. However, the company is more than willing to make the move in order to stay relevant and preserve the social roles of gas stations.

“EV chargers don’t make any money and they never will. But this is a path Hyundai Oilbank is willing to take,” said Han Hwan-kyu, head of sales and marketing of Hyundai Oilbank. By 2023, Hyundai Oilbank aims to roll out EV charging systems at 200 of its service stations from the current 20.

While keeping up with the new mobility trend, Hyundai Oilbank’s mission is to reinvent the gas stations and find an alternative business model for its owners.

“Gas stations as we know now would eventually disappear. But we have to think about ways to incentivize gas station operators to maintain their businesses (for the sake of customers),” Han said.

“One filling station in Seoul costs more than 10 billion won and there is a lot of investments involved,” Han added.

In one such effort, Hyundai Oilbank has partnered with Korean e-commerce giant Coupang to use service stations as last mile logistics hubs.

“The size of a service stations is about 1,000 square meters. There is no facility in Seoul with that huge space. At night, when business runs slow, 5-ton and 10-ton Coupang trucks visit Hyundai Oilbank pump stations and unload payload,” Han said. Coupang delivery workers will then pick up the packages in their own vehicles to complete final deliveries to customers.

“Thanks to this partnership, Coupang doesn’t have to establish additional logistics centers,” he said.

In exchange for letting Coupang utilize the service stations as logistics hubs, operators each are given about 2 million won per month, Han added, allowing them to prepare for the loss of revenue in gasoline sales when EVs start to take over.

According to Boston Consulting Group, when EVs take up 5-10 percent of all mobility on the road, 25-30 percent of gas stations will earn returns below their operation costs and be at risk of closure, unless they adapt and make necessary changes.

While preparing for the seismic shift in the retail fuel industry, the firm is also committed to adopting an environmental, social and corporate governance framework as guiding principles in management, investment and other key business decisions.

One of the projects driven by the ESG drive is one that aims to reduce incidence of environmentally destructive oil leaks.

Under the project, Hyundai Oilbank will roll out its patented real-time oil leak detection system “Holmes,” which can pinpoint the location of oil leaks inside pipes without physically applying pressure, to nearly half of its oil stations.

Gas stations conduct periodic checks to see whether there are any oil leakages from pipes buried underground. However, as oil leakage checks are conducted by giving maximum pressure to pipes, the checks themselves can trigger oil leakages to pipes that would have worked just fine otherwise. For this reason, some operators have been shunning conducting oil leakage checks.

“Oil leaks happen over a long period of time, drop by drop. When soil is contaminated, operators have to dig out the dirt and fill the site with clean soil, which costs between 300 million won to 1 billion won. However, installing Holmes costs just 5 million won, allowing service stations to respond preemptively to oil leaks,” Han said.

According to Hyundai Oilbank, one of the top five global oil companies has enquired the company about Holmes.

Taking a step further on the environmental front, Hyundai Oilbank is also working to power its oil storage facilities with solar energy.

“Hyundai Oilbank will construct solar power generation facilities at leftover spaces inside oil storage facilities. By doing so, we will run the storage facilities 100 percent with solar power and make profits by selling remaining electricity,” Han said.

Hyundai Oilbank has a total of eight oil storage facilities nationwide. These facilities utilize motors to pump oil from oil tankers. Also, particular petrochemical products -- such as bunker fuel widely used for marine vessels -- have to be heated all the time during their storage. These processes consume a huge amount of electricity. Hyundai Oilbank is waiting for approvals to install large-scale solar modules at two locations -- one in Incheon and the other in Mokpo, South Jeolla Province.

Meanwhile, Han said charging EVs will never be as cheap as it is now.

“The government imposes about 720 won per liter of gasoline as oil tax. The oil tax consists of transportation tax, education tax and driving tax. The government last year reaped 11 trillion won as oil tax. The transition to EV will create a hole in that tax revenue and force the government to levy the same type of taxes on EVs in the future,” Han said.

Electricity offered at EV charging stations are currently only imposed with value-added tax.

By Kim Byung-wook (kbw@heraldcorp.com
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