Shell takes a potential billion dollar hit over decision to pause SAF facility construction

Shell has revealed it will take a financial hit of between $600 million and $1 billion from pausing construction of its biofuel plant in Rotterdam that was designed to produce 820,000 tonnes of biofuels a year, split between sustainable aviation fuels and renewable diesel, from used cooking oil and animal fats. First announced in September 2021, the former Pernis refinery at the Shell Energy and Chemicals Park Rotterdam was expected to open this year and be one of the biggest facilities in Europe producing fuel from waste. The oil major has cited difficult current market conditions for biofuels in Europe due to oversupply, cheap imports and lower than expected growth in demand for biodiesel. Technical problems had already led to delays in the project’s construction. Former Shell Aviation President Jan Toschka left the company earlier this year to join a new SAF venture, Zaffra, located in Amsterdam. Meanwhile, a new Dutch SAF feedstock startup Green Air Fuel Technology (GAFT) is on a fund-raising round to help develop its novel process.

Back in 2021, Shell said it was aiming to produce 2 million tonnes of SAF by 2025, and for SAF to make up 10% of its global aviation fuel sales by 2030. As part of its Powering Progress strategy, the company planned to transform its refineries into five energy and chemical plants, reduce the production of traditional fuels by 55% by 2030 and provide more low-carbon fuels, including for aviation. The Rotterdam project was said by the company to require “hundreds of millions of dollars of investment each year during construction.”

Announcing the decision to “temporarily pause” construction, Shell said it would “address project delivery and ensure future competitiveness given current market conditions.”

Added Huibert Vigeveno, Shell’s Downstream Renewables and Energy Solutions Director: “[This] will allow us to assess the most commercial way forward for the project. We are committed to our target of achieving net zero emissions by 2050, with low-carbon fuels as a key part of Shell’s strategy to help us and our customers profitably decarbonise. And we will continue to use shareholder capital in a measured and disciplined way, delivering more value with less emissions.”

Dogged by technical difficulties, Shell said earlier this year the Rotterdam facility would be operational in the latter part of the decade. Just prior to announcing plans for the Rotterdam facility in 2021, Shell pulled its commercial and technical support, as well as passing up an equity share option, in the Velocys Altalto municipal waste to jet fuel project in north-east England. Shell said it had “decided to focus our resources on other lower-carbon fuels opportunities which leverage our own technology.”

In 2019, Shell also announced technical and commercial support for developing a SAF project led by SkyNRG to construct a production plant in Delfzijl, Netherlands, capable of producing 100,000 tonnes of SAF annually. Originally planned for commissioning in 2024, the project has so far not progressed.

Two years ago, Shell Aviation joined with Accenture and Amex GBT to launch the Avelia book-and-claim programme that enables corporations to verifiably purchase SAF to compensate for the emissions created when their employees fly on company business.

Elsewhere in the Netherlands, GAFT is developing a proprietary process in which waste feedstock, or synthetics, can be fermented to produce a batched process HEFA replacement that can be used in conventional refining facilities for SAF. Having received EU funding of €2.5 million to accelerate its technology, GAFT is now on a fund raise to aid the development of a first-of-a-kind plant and is involved in trial projects using its electrolysis units in Denmark and Romania.

The company says with a prospective HEFA feedstock squeeze expected by 2030, it can provide SAF producers with an economical, alternative feedstock that has no fossil fuel or food origin.

“In Europe and globally, the HEFA feedstock volumes cannot keep pace with new SAF production volumes. GAFT brings best available technology components together with unique patents for a first-of-a-kind, future-proof SAF feedstock plant,” said Frank Schreurs, Chief Executive of GAFT. “Our technology tackles the HEFA feedstock shortage to meet the rapidly increasing SAF market demand and we are working with our partners to bring forward our first deployment in the coming year.”

Photo: Shell

Christopher Surgenor

Editor

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