BP will invest Yuan 353 million ($48.54 million) to acquire a 15% stake in Lianyungang Jiaao New Energy, a producer of renewable diesel and sustainable aviation fuels (SAF). The company is owned by Zhejiang-based Jiaao Enprotech. Lianyungang Jiaao New Energy has SAF production capacity of 100,000 tonnes per year, which could become crucial as the market anticipates SAF mandates in China. In July 2023, the Civil Aviation Administration of China drafted a fuel standard to ensure the viability of alternative fuels in the aviation sector. The complexity and high costs of the SAF industry make investments like BP’s essential to its development.
The global SAF market: Growth and challenges
Global consumption of SAF has reached 450,000 to 500,000 tonnes in 2023, double the previous year’s figure, although this represents only 0.1% of total jet fuel consumption. According to the International Air Transport Association, worldwide consumption of SAF is expected to reach 2.1 million barrels per day by 2050, or almost 24% of global jet fuel demand. In 2023, annual global SAF production will be around 2.24 million tonnes, with China contributing 298,000 tonnes. Global policy initiatives should lead to a significant increase in demand for SAF. SAF projects could reach a capacity of 600,000 barrels per day by 2030, depending on political support for investment. For example, the ReFuelEU initiative aims to incorporate 6% SAF by 2030. The UK and Japan have set targets of 10% FAS by 2030. Many other countries are considering new SAF policies, which should further stimulate demand.
BP’s strategic adjustments in biofuels
Despite this investment, BP is scaling back its plans for new SAF and renewable diesel projects at its existing sites. The company has suspended two projects, including a biofuel unit at the Lingen refinery in Germany, while continuing to evaluate three others. However, BP will be pursuing stand-alone biofuel projects in Australia (Kwinana), Spain (Castellon) and the Netherlands (Rotterdam). This decision aims to reduce the company’s exposure to the European biofuels segment, while developing its operations in Brazil. Platts, part of Commodity Insights, valued SAF production costs in Southeast Asia at $1,585.51/tonne on July 9, down $16.45/tonne on the previous valuation. This momentum in the SAF sector underlines the growing importance of renewable energies in the aviation industry, requiring ongoing investment and political support to meet global sustainability targets.
