INTERVIEW: Japan's ITOCHU eyes investment across SAF pathways amid growing demand

Japan's trading company ITOCHU Corp. aims to build a stable sustainable aviation supply chain by 2030 to meet the country's growing demand, by investing in domestic and overseas production projects and diversifying across various production pathways, its senior official told S&P Global Commodity Insights.

"We would like to touch, for example, securing feedstock and we will share the production to have our own equity SAF, and we will supply SAF stably to the market. And also these need partners," said ITOCHU's Renewable Fuels Unit assistant general manager Michihiko Ishikawa in an interview at the company's headquarters in Tokyo.

The company is in talks with several potential partners, though no projects are ready to be announced, Ishikawa added.

Considerations for production projects include locations for freight economics, feedstock availability, government support as well as proximity to SAF offtakers in countries with mandates and incentives to do so.

Such investments should also be done at the earliest, he said.

"Earlier is better. Because from an investor point of view, we would like to collect the cash earlier. And also that, in order to keep our position in Japan, we have to have a stable supply chain," Ishikawa added.

ITOCHU was the first company in Japan to import neat SAF, and currently supplies blended SAF at three major Japanese airports including Haneda and Narita.

After the company established downstream operations and domestic distribution systems, it has its sights set on other areas in the SAF supply chain.

"If there's some opportunity to invest for the upstream or middle stream, we are happy to focus on more," Ishikawa said.

Already, the company had invested in renewable fuels producer Raven SR, which is expected to start SAF production in California from 2025 and plans to produce 200,000 mt/year in Europe and the US by 2034.

In January last year, the US-based producer also inked decade-long agreements to supply SAF to Japanese carriers Japan Airlines and All Nippon Airways.

The Japanese government introduced a proposal to mandate the replacement of 10% of its 2030 jet fuel demand with neat SAF, with plans to introduce such regulations by mid-2024.

In November 2022, the Ministry of Land, Infrastructure, Transport and Tourism had set the country's consumption target of neat SAF at 1.71 million kiloliter, or 10.8 million barrels in 2030.

Key hurdles

Uncertainty over commercially viable production pathways in the future is a key challenge for ITOCHU when identifying SAF projects to invest in.

"We have no confidence which one [SAF pathway] is the best. No one has an answer. So maybe we will invest one by one, make a portfolio to secure, to decrease the risk of the production," Ishikawa said.

For instance, SAF produced from the HEFA, Hydrotreated Esters and Fatty Acids, process, which uses oils and fats as feedstock, may be an established technology but there are concerns over the growing cost to secure feedstock, he said.

"AtJ (Alcohol to Jet) might be more relaxed for securing feedstock, but there is no one on stream with a commercial-sized one," he added. "FT (Fischer-Tropsch) may be more of a dream because they can use almost all the carbon materials, but technology-wise, it needs time."

"Once such technologies are realized, maybe it will improve their technology cost wise, and I guess we're happy to invest to produce SAF at a competitive cost."

Raven SR's upcoming facility produces FT synthetic fuels like SAF from converting organic waste and landfill gas using a non-combustion thermal, chemical reductive process, it said on its website.

Meanwhile, Japanese refiners Cosmo Oil and ENEOS' facilities will start SAF production via processes like HEFA, while Idemitsu's will use AtJ technology, although it is also considering using HEFA for future units.

Unique position

As SAF production facilities start to come online in Japan in the coming years, the company said it is committed to its role of maintaining a stable SAF supply chain in the country.

"If the market requires secure feedstock for SAF production, we may consider to add this new mission," said Ishikawa.

As a trading conglomerate, ITOCHU could work internally with its other teams handling feedstock like ethanol to meet market demand, he added.

"We may provide some solutions to users when they enquire more about competitive feedstock or technologies," he said. "If more lower-cost project or lower-cost technology are established, we may invest."

Meanwhile, the company said it will continue to import neat or blended SAF depending on market economics, while volumes would depend on Japan's SAF overall domestic output levels, Ishikawa added.