22 Feb 2022 | 09:51 UTC

FEATURE: SAF garnering Asian support as key aviation decarbonization pillar

Highlights

SAF supply to grow to 5.8% of global jet fuel market by 2050: Platts Analytics

Singapore to play pivotal role in Asia to ramp up SAF supply

More demand signals from airlines, industry-wide collaboration needed to boost SAF use

Sustainable aviation fuel is gaining widespread consensus as a key lever to decarbonize 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 recognize that SAFs are a key building block to set us on our path towards achieving our long-term decarbonization goals," Grazia Vittadini, Chief Technology and Strategy Officer Rolls-Royce plc said 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% 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 Platts Analytics currently forecasts that total available SAF supply will grow from a miniscule proportion of the global jet fuel market today to 5.8% by 2050, with Europe and the US 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 is supportive of SAF penetration.

Singapore's eminence

Singapore is set to also play a pivotal role in the SAF market as rising thrust on curbing carbon emissions, a need to maintain reputational goodwill, strengthening infrastructure, and increasing moves by suppliers and blenders to make it readily available is taking centerstage.

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

Under this pilot program, it will purchase blended SAF from ExxonMobil, with the product comprising 1.25 million liters 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, it said.

"With our Singapore refinery expansion coming on stream in early 2023, we are able to produce up to 1 million 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 the same statement.

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

Shell has also successfully upgraded its facility in Singapore to enable blending of SAF and aims to produce around 2 million mt of SAF annually by 2025 globally. 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 Feb. 17.

Overcoming hurdles

"SAF today is at a premium compared to conventional jet fuel -- two to eight times more expensive," Doris Tan head of aviation for Asia-Pacific & the Middle East at Shell 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 Feb. 21, FOB Singapore SAF was assessed at $2,461.36/mt, S&P Global Platts data showed. Platts uses a conversion factor of 8.105, which would make FOB Singapore SAF the equivalent of $303.68/b. In comparison, FOB Singapore jet fuel/kerosene was assessed at $103.59/b at the Asian close Feb. 21, making SAF nearly three times costlier than jet fuel.

In addition to the stark price difference between the two products, industry sources from the oil complex also felt that the timing was not ideal given the downstream aviation airline was still struggling to restore cash flow and flight operations to pre-pandemic levels.

"Timing is not right...I guess a few years later would be better. 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.