Euglena, Petronas and Eni greenlight $1.3 bil biofuel production plant in Malaysia

Japan's Euglena, Malaysia's Petronas and Italy's Eni have reached a final investment decision to construct and operate a biofuel production plant in Malaysia, the companies said in a statement July 26.

The commercial plant will be located within the Petronas Pengerang Integrated Complex in Johor and is scheduled to begin operations by the second half of 2028. The plant will produce sustainable aviation fuel and next-generation biodiesel fuel, including renewable diesel or hydrotreated vegetable oil (HVO).

According to the statement, the biofuel facility construction -- valued at approximately $1.3 billion -- will see the establishment of a joint venture company and is set to commence during the fourth quarter of 2024.

The feedstock processing capacity of the biofuel plant has been pegged at 650,000 mt/year, utilizing waste and residue-based materials such as used vegetable oil, animal fats and waste from vegetable oil processing.

Future feedstock processing plans for biofuel production at this plant also include the use of biomass materials like algae oil derived from microalgae.

The strategic location of the plant within the Petronas Pengerang Integrated Complex will leverage existing facilities and utilities, providing easy access to major international shipping routes, the companies said. This will enable the plant to meet the growing global demand for biofuels in the aviation and transportation sectors.

The plant will employ the Ecofining technology and pretreatment equipment developed by Eni and Honeywell UOP, allowing for flexible and maximized production of SAF and HVO.

This technology will enable the plant to process a wide range of raw materials efficiently.

The biorefinery aims for a versatile setup to optimize the production of sustainable aviation fuel and hydrogenated vegetable oil for various transportation sectors. The projected 650,000 mt/year of raw materials processing ability can yield up to 12,500 b/d of various biofuels such as SAF, HVO and bio-naphtha, the companies said.

Investment and finance

The project entails phased equity injections and loans by shareholders on a pro-rata basis, totaling $65 million-$195 million for a 5%-15% stake in the joint venture company. Petronas and Eni will be major shareholders, with Euglena having an option to increase its stake to 15% within nine months post-closing.

The project anticipates annual profits exceeding Japanese Yen 6 billion for Euglena at a 15% stake, based on a biofuel price of Yen 300/ liter and a joint venture company net profit margin exceeding 20%.

The partners have a nine-month grace period for additional financing to increase their stake. Petronas and Eni will be the largest joint venture company shareholders, with governance by board members from Petronas, Enilive, appointing two directors each, and Euglena appointing one director. The key management roles such as CEO and CFO will be nominated by Petronas and Enilive.

Euglena completed Japan's first demonstration plant producing renewable jet and diesel fuels in 2018.

The firm has also been the first Japanese supplier to introduce domestic SAF into the Narita International Airport's hydrant system and provide SAF to governmental aircraft.

Meanwhile, Petronas has signed an SAF offtake agreement for 230,000 mt/year with the Malaysian aviation group as the firm develops SAF production capacity via alcohol to jet and co-processing, in addition to this HEFA project. Petronas is also studying the use of used cooking oil and palm wastes for feedstock sourcing.

SAF is expected to account for 0.61% of global aviation fuel consumption in 2024, up from 0.31% in 2023, according to S&P Global Commodity Insights. This is expected to rise to 3.24% in 2040 and 24.06% in 2050, from 20,000 b/d in 2023.

Platts, part of Commodity Insights, assessed SAF production costs (palm fatty acid distillate) in Southeast Asia at $1,592.01/mt on July 25, increasing $23.71/mt for the day.