Posco, South Korea”s top steelmaker, said Thursday that it has established a subsidiary to operate a synthetic natural gas business to reduce its LNG consumption.

The subsidiary, named POSCO Green Gas Technology, was established in Posco”s Gwangyang complex on the country”s southern coast, where it is building an SNG plant with a capacity of 500,000 mt/year.

The plant which will produce SNG by processing low-cost coal will be completed by August this year and start commercial production in January next year.

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 Posco has spent Won 870 billion ($824 million) since June 2011 on the coal-to-gas plant, which is expected save the company Won 200 billion a year on LNG imports, Posco said in a statement.

Posco has also agreed with Mongolia”s energy-focused MCS Group to establish a 50:50 joint venture to build an SNG plant in Mongolia. The two companies are aiming to complete financing by the end of this year and start work on the plant with a target date for bringing it online of the end of 2018.

Posco has recently picked the SNG business as one of its future growth engines. Posco has been conducting research since 2009 with the country”s top oil refiner SK Innovation to develop technology to make SNG and coal-based oil through a coal-to-liquids process.

The steelmaker currently consumes some 60,000 mt/month of LNG to fire its plants. It imports the LNG from the BP-led Tangguh project in Indonesia under a 20-year contract signed in 2009 for 550,000 mt/year.

Source: Platts