Sustainable aviation fuel garners Asian support as key decarbonisation pillar

SUSTAINABLE aviation fuel (SAF) is gaining widespread consensus as a key lever to decarbonise the aviation industry, with the dark clouds shrouding its ubiquitous use showing signs of dissipating in Asia as various industry stakeholders come together across the value chain to accelerate its use.

"We are all big advocates for the development of alternative propulsion solutions including hydrogen, hybrid-electric and electric, and we also recognise that SAFs are a key building block to set us on our path towards achieving our long-term decarbonisation goals," Grazia Vittadini, chief technology and strategy officer at Rolls-Royce, said on Feb 15.

On the same day, Rolls-Royce, Airbus Safran and Singapore Airlines inked the Global Sustainable Aviation Fuel declaration, calling on industry partners from the aerospace, aviation and fuel value chains to collaborate towards SAFs uptake and to ensure its steady ramp-up over the next 10 years.

According to a factsheet on the International Air Transport Association website, SAF could contribute around 65 per cent of the reduction in emissions needed by aviation worldwide to reach net-zero in 2050, with the other contributions coming from new technologies, carbon offset and capture, as well as infrastructure and operations.

S&P Global Commodity Insights forecasts total available SAF supply will grow from a miniscule proportion of the global jet fuel market today to 5.8 per cent by 2050, with Europe and the United States being primary drivers of country-level demand.

This forecast has substantial upside, particularly if countries such as India and China that are considered major growth markets for jet fuel demand begin to introduce some form of policy framework that supports SAF use.

Singapore's eminence

Singapore is also set to play a pivotal role in the SAF market with a rising move to curb carbon emissions, maintain reputational goodwill, and strengthen infrastructure is joined by increasing moves by suppliers and blenders to make it readily available.

Singapore Airlines and Scoot, the low-cost carrier of the Singapore Airlines Group, as part of a pilot programme will use SAF for all flights from Q3 2022, the carrier said on Feb 11.

Under this pilot programme, it will purchase blended SAF from ExxonMobil, with the product comprising 1.25 million litres of neat SAF, which will be supplied by Neste and produced from used cooking oil and waste animal fats and blended with refined jet fuel at ExxonMobil's facilities in Singapore.

"With our Singapore refinery expansion coming onstream in early 2023, we are able to produce up to 1 million metric tonne (mt) of SAF per annum to serve aviation markets in the Asia-Pacific region and globally," Thorsten Lange, executive vice-president renewable aviation of Neste, said in a statement.

Shell has become the first SAF supplier to customers in Singapore after recently making deliveries to SIA Engineering Company and the Republic of Singapore Air Force.

Shell has also successfully upgraded its facility in Singapore to enable blending of SAF and aims to produce around 2 million mt annually by 2025. To support this, Shell has outlined plans for a biofuel facility, subject to final investment decision, at the Shell Energy and Chemicals Park Singapore. The facility can potentially produce 550,000 mt of low-carbon fuels a year, including SAF, Shell said on Feb 17.

Overcoming hurdles

"SAF today is at a premium compared to conventional jet fuel; 2 to 8 times more expensive," Doris Tan, Shell's head of aviation for Asia-Pacific and the Middle East, said at a media briefing recently.

"So actually, what we need is we need more demand signals from airlines, from B2B customers, to signal that demand to the producers, and then the producers in turn will ramp up production and with economies of scale bring down the cost of SAF closer to that of conventional jet fuel."

At the Asian close on Feb 21, FOB Singapore SAF was assessed at US$2,461.36/mt, S&P Global Commodity Insights data showed. Commodity Insights uses a conversion factor of 8.105, which would make FOB Singapore SAF the equivalent of US$303.68/b. In comparison, FOB Singapore jet fuel/kerosene was assessed at US$103.59/b, making SAF nearly 3 times costlier.

In addition to the stark price difference between the two products, industry sources from the oil complex also feel timing is not ideal given airlines are still struggling to restore cash flow and flight operations to pre-pandemic levels.

"They (airlines) cannot afford such high (SAF) price, especially after Covid. Inflation is hitting the global economy. All things considered... not the right timing," said an industry source.

Still, Asia Pacific will be "catching up very soon" and will overcome various hurdles as SAF is indeed a very important theme for customers and industry stakeholders, another source said.

The writer is senior editor at S&P Global Commodity Insights. Based in Singapore, she focuses on oil and refined oil products for the Asia Pacific region.

This is a commentary of S&P Global Commodity Insights (formerly known as Platts).