INSIGHT CONVERSATION: Damian McLoughlin, FlyORO

This is the first of a seven-part Insight Conversation series where leaders and stakeholders in the biofuels space share their thoughts on the opportunities and challenges in Asia's biofuels sector.

For Damian McLoughlin, chief commercial officer at FlyORO, encouraging the adoption of sustainable aviation fuel across the supply chain means moving away from a one-size-fits-all mentality.

McLoughlin has over two decades of experience in the jet fuel industry, starting off at BP and having worked at Neste, Oneworld and Qantas more recently. Now with FlyORO, a Singapore-based company that works on modular solutions for SAF blending, McLoughlin talks to S&P Global Commodity Insights Senior Editor Aditya Kondalamahanty about how last-mile blending and flexibility can lower entry barriers for SAF adoption.

What are the common problems around last-mile blending in the SAF supply chain that FlyORO is looking to solve and how?

Typically, refined petroleum products -- whether aviation fuel, gasoline or diesel -- are transported and distributed at a large scale. This involves large fuel terminals with large storage tanks, pipelines and infrastructure. What we have done is we've shrunk that down to a very small-scale infrastructure so that we can deploy that same type of terminal operational setup anywhere in the value chain at a very low cost.

Building a new storage tank will probably take between 18 and 24 months from conception to commissioning and then to operating that tank. That's a long lead time and there's a huge cost. At FlyORO, we are trying to solve two things: the cost and the lead time.

In the aviation fuel context, what “last mile” means is typically at the airport or very close to the airport. Our solution, which we call Alpha Light, is a modular small-scale solution beside or adjacent to very large supply and storage tanks at an airport. You're able to then blend SAF with the conventional jet fuel that's already sitting in the airport fuel infrastructure and bring the needed SAF molecule to that last-mile point, blend it there and then throughput it into the airport supply chain.

How do inconsistencies in SAF mandates across markets affect the supply chain?

In certain markets, there is what's called a blending obligation mandate. For example, the EU has a 2% blend, and that obligation will increase over time. Then there are the non-obligated markets -- or the voluntary markets -- wherein there is no policy that forces SAF use, but there is demand for it as it allows the user to report emission reductions. For example, [it can be used by] airlines to reduce their scope 1 emissions, or companies for their scope 3 emissions derived from business travels made by their corporate officers. For them, the ability to flexibly blend SAF is a tangible solution as they can potentially benefit from reducing their emissions as part of their sustainability strategy.

Today, upstream players operate using large storage tanks in commercial fuel terminals that offer a one-size-fits-all solution. This means the inability to dial a blend [or] to select a different blend percentage for the buyer’s demand. But in the market today, one size doesn't fit all. Airlines, aircraft operators, corporate customers, and airports all have a need and a want for optionality.

Where does the modular blending technology fit in the SAF supply chain and what is the addressable market for this technology?

We're agnostic in terms of who we work with. Think all the way upstream -- the producer of the SAF, usually an oil major or an oil company that has a fossil fuel refinery -- we can work with them to create a SAF blend for their buyers.

When you come down midstream, you've got those commercial fuel terminals -- big storage tanks, pipeline connected, barges coming in to take the product off rail connections. What they don't have is the ability to tailor the blend because they're optimized for a standardized large-scale operation. We can work with them to offer their customers an added unique selling point of tailoring the blend.

Then you come all the way downstream to the airports. Some airports own the fuel assets at the location, and they manage it themselves. Other airport models involve joint ventures along with oil majors, where they bring in their own supply of jet fuel and then they supply the contracted volume requirements to their customers.

The key for FlyORO is to deploy AlphaLite at a location in the value chain where it makes the most operational, logistical and commercial sense.

In essence, democratizing the supply chain to suit the market’s demand?

Yes. Right now, for the participants in the value chain -- airlines, aircraft operators and everybody else -- don't have the ability to say, we want to participate, or we want to purchase SAF. But at a 35%, or 38% or a 40% bio component in the blend, the cost for something that is already two or three times more expensive than jet fuel is quite a stretch on the budget.

Also think of smaller regional-sized airports or airlines who would like to participate but perhaps only on the flights that are going to the EU. If they go to a producer or a supplier and say, we'd like to source a 10% blend from you -- it’s rarely a straightforward transaction. This would require not just a retooling of the fuel supply system at the airport level, but also involves complexity through the supply chain from vessel, transport to terminal capacities. You’d also have to optimize the utilization levels as fuel is a commodity after all, where every pip counts.

Democratizing the SAF value chain through modular blending technology gives aircraft operators the flexibility to participate on their own terms. Some may choose to purchase neat SAF directly from producers, others might blend closer to their hub using mobile solutions, and some may opt for book-and-claim models -- allowing them to claim emissions reductions without taking physical delivery. Ultimately, we're removing barriers to entry and giving operators more control over how and when they engage -- a critical step to scaling adoption across a diverse industry.

On the upstream aspect, there are also new producers coming into the space who don't have that integrated supply chain. They have got a new innovative technology to produce SAF from a different pathway, such as alcohol-to-jet or carbon capture, and they are more interested in producing the neat molecule and then selling that to the market, but they need to find a party who can blend this with fossil jet fuel. That is where we will see more opportunity in the future upstream for these new SAF producers coming into the market.

What’s your view on how tracking and tracing models can be accepted and standardized globally?

The traceability of the SAF molecule is the single most important thing. If an airline has sourced volumes of SAF and is communicating that in a press release or annual sustainability report, then it is critical that it is confident about the credibility of that claim.

If not, you risk a similar outcome as we're seeing in the carbon offset market, where loss of credibility impacts the ability of that sector to grow.

On standardization, it needs to be user-friendly -- easy to use and easy to access. It must not be too restrictive in how a given platform determines the criteria of SAF or SAF Certificates (SAFc) for Scope 3 credits.

We need to have a kind of maximum flexibility in the beginning because the goal of all of us in the industry is to, in time, get to a very big S for sustainability, which means high integrity. But that's the future. Today, we must leverage what we have available to us.

How is the difference in opinions playing out between palm oil producers and SAF registries?

I've had this discussion with stakeholders in Singapore. There is a mindset of the Global North coming to the Global South saying, “you shouldn't be doing these things” after the Global North has spent the last 200 years doing those things.

It's fair to say that exclusion is not the solution, particularly in economies like Indonesia and Malaysia, where palm oil is a critical element of their economy. Their participation is often constrained by policy debates around palm oil as a feedstock. While palm oil is readily available, sustainability concerns limit its acceptance in global supply chains. Still, leveraging existing resources in these regions, even as a near-term step, could accelerate progress and promote more inclusive SAF development worldwide.