Shell to deliver first SAF from Rotterdam plant from 2025

Shell expects sustainable aviation fuel to be delivered from its 820,000 mt/year biofuels plant in Rotterdam from 2025, although more commercially ready technologies and production pathways were needed to help the firm meet demand from its customers, it said.

The Shell Energy and Chemicals Park Rotterdam plant is using HEFA to produce its biofuels -- a technology Shell called "proven and mature" – by refining vegetable oils, waste oils or fats using hydrogen.

Shell said it will continue to invest in promising technologies to produce more SAF, while adding that its growing portfolio of SAF supply agreements will also help to meet global demand for the greener fuel, it said in response to queries from S&P Global Commodity Insights following the suspension of its biofuels unit and a Group II base oil plant in Singapore, which Shell confirmed to the media in late March this year.

The company said late-2021 that a 550,000 mt/year biofuels facility – which will produce low carbon fuels like SAF and renewable diesel – was being explored in Singapore. When operational, it will be one of the largest biofuels facility in Asia, allowing Shell to provide SAF to customers in Asia and worldwide, the company said on its website.

Shell did not specify the production capacity of the two suspended projects.

The global oil giant aims to produce around 2 million mt/year SAF by 2025 and have at least 10% of its global aviation fuel sales as SAF by 2030.

In recent years, Shell has also been investing in technologies to scale SAF production as the industry targets net-zero emissions by 2050, such as a startup that aims to produce SAF from ethanol.

In 2022, Shell also launched a blockchain platform to aggregate SAF demand to provide confidence for suppliers to increase investments in production, it added.

Slower SAF take-up in Asia

Shell's biofuel projects' suspension came amid lukewarm demand for SAF in Asia, as few Asian carriers have taken steps to adopt the greener fuel in its operations, market sources said.

The relatively higher costs play in the economies of scale as demand remains low, and the cycle continues as SAF manufacturers struggle to produce in bulk and reduce sale prices, sources said.

Platts, part of S&P Global Commodity Insights, assessed Asia Sustainable Aviation Fuel (PFAD) on May 2 at $1,480.05/mt, down 1.2% on the month while SAF (UCO) was at $1,650.49/mt, down 1.5%. Platts assessment also showed the price of SAF is around twice that of conventional jet fuel in Asia.

Another significant obstacle in Asia is a lack of government intervention compared to other regions, as fewer mandatory regulations enforce or incentivize commercial SAF adoption, resulting in less financial support for Asian airlines to take up the more expensive SAF.

In contrast, the EU agreed on a 'ReFuelEU Aviation proposal' last week, which requires fuel suppliers to blend SAF in increasing amounts from 2025. The new rules will also require fuel suppliers to supply a minimum share of SAF at EU airports, starting at 2% of overall fuel supplied by 2025 and reaching 70% by 2050.

Also, aircraft operators departing from EU airports are to refuel only with fuel necessary for flight to avoid emissions related to extra weight or carbon leakage caused by 'tankering', or deliberately carrying excess fuel to avoid refueling with SAF.

Collaborative efforts between airlines and SAF manufacturers can have a similar effect in creating demand to justify increasing supply. In 2022, Singapore Airlines Group started operating flights running on blended SAF as part of a year-long pilot, with the SAF supplied by Neste and blended with refined jet fuel at ExxonMobil's facilities in Singapore.

Meanwhile, airlines in the EU are also making way to join the First Movers Coalition, which works with leading organizations to drive technological advances that will help industries around the world reach net-zero carbon emissions by 2050. Germany's Lufthansa joined the coalition in March, making it the first European airline group to do so.