Australia’s sustainable aviation fuel ambitions are set to spur decarbonisation of the airline industry, writes Loren Puette, biofuels analyst at S&P Global Commodity Insights.
During the past year, a flurry of announcements regarding the establishment of “biojet” refineries have been publicised across the Asia-Pacific (APAC) region. This sustainable aviation fuel (SAF) is an alternative green “drop-in” fuel that can be blended with traditional jet kerosene, and it represents an attractive path for airports and airlines to decarbonise their industry.
Within APAC, Singapore is the largest SAF producer and it launched a pilot blending program with Singapore Airlines and its budget subsidiary, Scoot, at Changi Airport in July this year. In June 2022, Chinese petroleum refining company Sinopec announced it had produced its first commercial batch of SAF at its Zhenhai refinery in Zhejiang province after years of research and preparation.
Japan, South Korea, Malaysia, Indonesia and Thailand have also put forward proposals to establish SAF industries in the near future.
Not to be left behind, Australia has thrown its hat in the SAF ring. On 14 July, 2022, it announced the forthcoming establishment of a SAF association akin to the UK’s Jet Zero Council and the Canadian Council for Sustainable Aviation Fuels.
The following day, BP reiterated its plan to launch a 10,000 barrels per day (approximately 450,000 metric tonnes per year) hydrotreated vegetable oil (HVO) and SAF refinery at its Kwinana complex in Western Australia in 2025. The refinery will utilise used cooking oil (UCO) and tallow as feedstocks.
In February, BP signed a licensing agreement with petroleum company Honeywell UOP for refining technology to produce HVO and SAF in Australia. Across the APAC region, similar technology agreements with Honeywell UOP were signed by Indonesia’s PT Pertamina, China’s Oriental Energy and Japan’s JGC Holdings Corporation and Cosmo Oil Company.
In light of recent developments, S&P Global Commodity Insights’ 2025 SAF production forecast for Australia was increased from 3000 metric tonnes to 10,000 metric tonnes. We believe domestic SAF output will rise to 300,000 metric tonnes by 2030.
On 12 July, 2022, Future Energy Australia – a 50/50 joint venture between Perth-based Carnarvon Energy and Melbourne-based Frontier Impact Group – signed a non-binding memorandum of understanding with Western Australia’s Horizon Power to supply HVO for use in its diesel-based electrical generators. The joint venture is set to launch Australia’s first HVO refinery in late 2023 or early 2024 in Narrogin, Western Australia.
This refinery would utilise wheat stubble, oat husks and other cellulosic biomass as feedstock. Carnarvon CEO Adrian Cook noted the company hopes to launch 20 similar HVO plants with a combined capacity of 500 million liters per year (roughly 390,000 metric tonnes per year) by 2030.
In April, Australia’s Oceania Biofuels announced it will launch a UCO/tallow-based 350 million liter per year (approximately 273,000 metric tonnes per year) HVO/SAF refinery in 2025. The refinery will be in Gladstone, Queensland, near the same complex where Southern Oil operates its HVO laboratory/pilot plant.
The dual launch of BP’s and Oceania Biofuels’ SAF refineries dovetails with the blending aspirations of Qantas, Australia’s leading airline.
Qantas will be a key adopter of SAF as the company reports pre-COVID-19 Scope 1 and Scope 2 CO2 equivalent emissions from aviation of 9.3 million metric tonnes – of which 36 per cent are from domestic flights and 64 per cent are from international flights – against approximately 25 million metric tonnes of CO2 emissions for Australia’s aviation sector as a whole.
In March 2022, Qantas set a SAF blending target of 10 per cent by 2030 and 60 per cent by 2050. In June 2022, Qantas Group and Airbus signed a five-year partnership agreement to invest US$200 million to promote the development of Australia’s SAF industry.
A 10 per cent blending target by 2030 for Qantas would imply nearly 350 million liters of annual SAF demand requirements, while a 60 per cent target by 2050 would imply 2.6 billion liters based on the S&P Global Commodity Insights reference case forecast of aviation activity growth in Australia.
The displacement of 2.6 billion liters of jet fuel/kerosene with SAF in 2050 could result in an emissions reduction of nearly 15 million metric tonnes of CO2 at a tailpipe level.
At the start of 2022, Qantas began offtaking batch deliveries of SAF from BP for its flights out of London, committing to 10 million liters of SAF consumption in 2022 with an option to extend the delivery terms through 2024.