BP to invest $48.54 million in China biofuels producer as market anticipates SAF mandates soon

BP will invest Yuan 353 million ($48.54 million) to acquire a 15% stake in Lianyungang Jiaao New Energy, a renewable diesel and sustainable aviation fuel producer owned by Zhejiang-based Jiaao Enprotech, according to a company report published July 9.

Jiaao Enprotech has 100,000 mt/year of SAF capacity and the deal comes amid market talks of China possibly announcing SAF mandates in the near future.

Upcoming SAF mandate

In July 2023, China's Civil Aviation Administration drafted a fuel standard to ensure the viability of alternative fuels in the aviation sector.

The SAF industry is not only more complex but also requires significant funding. Producers must also plan for a possible used cooking oil feedstock supply crunch in coming years, according to a market participant.

"It makes sense for state-owned and leading companies to take on SAF projects, given the high costs and intricate nature of the industry," the participant added.

Some industry participants are working on colocating, converting and integrating their facilities to venture into the SAF industry with the latest product offerings, according to a market source.

"I think some of the industry players are anticipating that the Chinese government will release SAF mandates, so most of them are getting themselves prepared," the market source added.

SAF demand surges

Global consumption of SAF reached 450,000-500,000 mt in 2023, double the previous year's volume, yet it accounted for only 0.1% of total jet fuel consumption, based on the International Air Transport Association data. Global consumption of SAF is projected to reach 2.1 million b/d by 2050, displacing nearly 24% of global jet fuel demand. In 2023, the annual global production of SAF was approximately 2.24 million mt (48,500 b/d), with China contributing 298,000 mt (6,500 b/d), according to S&P Global Commodity Insights reports and data from August-September 2023.

Meanwhile, policy initiatives around the world are expected to drive a significant increase in SAF demand. SAF projects could reach 600,000 b/d capacity by 2030, depending on the policy support for investments. Europe's ReFuelEU aviation initiative targets a 6% SAF blend by 2030, with 1.2% coming from renewable fuel of non-biological origin. The UK and Japan plan to introduce a 10% SAF target by 2030. Additionally, more countries are considering new SAF policies, further boosting demand projections.

Scaling back projects

Despite the latest investment, BP has been scaling back plans for new SAF and renewable diesel projects at existing sites, pausing two projects, including a standalone biofuels unit at its Lingen refinery in Germany, while continuing to assess three others. The company will proceed with standalone biofuels projects in Australia (Kwinana), Spain (Castellon) and the Netherlands (Rotterdam). This decision, which a BP spokesperson discussed June 21, aims to reduce the company's exposure to the European biofuels segment while expanding operations in Brazil.

Platts, part of Commodity Insights, assessed SAF production costs in Southeast Asia at $1,585.51/mt July 9, down $16.45/mt from the previous assessment.