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UAE's Neutral Fuels says biofuel sales doubled in 2022 as shipping demand takes hold

Highlights

Biofuels prices higher than regular fuels

IMO adopted biofuels rule in 2022

Japanese oil companies in UAE test biofuel blend

  • Author
  • Claudia Carpenter
  • Editor
  • Shashwat Pradhan
  • Commodity
  • Agriculture Energy Transition Oil Shipping

The UAE's Neutral Fuels Holdings Ltd. doubled its biofuel sales last year as the shipping industry, along with road vehicles and power generation, looks to reduce its traditional reliance on fossil fuels in the drive to curb emissions, the company's founder Karl W. Feilder told S&P Global Commodity Insights on Jan. 26.

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Demand for Neutral Fuels products is growing even faster so far this year, Feilder said, declining to provide volumes or prices it charges. "We more than doubled last year and this year is look very strong too."

A number of Japanese oil companies that import crude from the Gulf Cooperation Council region are now testing a biofuel blend made from used cooking oil for their ships in partnership with Neutral Fuels and bunker fuel provider Monjasa, Feilder said.

Neutral Fuels also has a multi-year agreement with the UAE's Abu Dhabi National Oil Co. to use a biodiesel blend for ships carrying people and materials from Abu Dhabi's Musaffah Port to offshore UAE platforms, he said.

Neutral Fuels is unique in the GCC, offering biodiesel containing 10% to 20% fatty acid methyl ester (FAME), also called biodiesel, blended with either marine gas oil (MGO) or very low sulfur fuel oil.

"Shippers are taking the first steps as it was only two years ago they were allowed to start using biodiesel," Feilder said.

"They obviously don't like that it's more expensive, but as it is a 'drop-in' fuel, they don't have to make any modifications to their engines. Other low carbon fueling solutions require significant changes to the engines. They also understand the industry hasn't done much to reduce their emissions in the 20 years before IMO 2020 and they want to change that situation."

The International Marine Organization allowed ships to use biofuels on a test basis in 2020 and last year adopted the rule for regular usage.

Biodiesel on Jan. 25 closed in Europe at $1,563/mt compared with Fujairah prices of $682/mt for VLSFO and $1,219/mt for MGO, he said. Platts assessed bunker fuel with 0.5% sulfur, delivered Fujairah, at $675/mt on Jan. 26, according to S&P Global data.

Blending these fuels with 10% biofuel reduces carbon footprint by 8.5%, he said, and the 20% blends would achieve 17% carbon savings. Neutral Fuels can provide biofuel at UAE ports including Jebel Ali, Khor Fakkan, Sharjah, Ras al Khaimah, Ruwais and elsewhere in Abu Dhabi, he said.

"More and more companies want to operate their vehicles on biofuel," he said, noting a trial started recently with Unilever Euro 5 trucks in the UAE running on 100% biofuel and 20% biofuel.

McDonald's, a partner with Neutral Fuels for 11 years, has used pure 100% biofuels for all of its trucks carrying food from its warehouse in Dubai South to its 190 restaurants in the country over 24 million km, he said. Other UAE customers include Del Monte, IKEA, Nestle, Spinney's and Carrefour, he added.

Neutral Fuels started a joint venture with Uniper Energy DMCC at Fujairah to sell biofuels to shippers in 2021, but the project is on hold until the parent company in Germany decides the future strategy for Uniper.