Biogas facility in Rotterdam cancelled by Shell
Shell, the Dutch energy major, has announced the permanent cancellation of its biofuels production project at the Shell Energy and Chemicals Park in Rotterdam, Netherlands. The decision comes after a comprehensive evaluation concluded that the plant would not be sufficiently competitive to meet customer demands for affordable low-carbon products.
Machteld de Haan, Shell's Downstream, Renewables and Energy Solutions President, made this statement. The cancellation is not a complete retreat from biofuels but a tightening of Shell's investment criteria, with the project deemed too costly relative to its peers.
The project, initially started in 2022, was planned to produce 820,000 tonnes of biofuels per year. However, on-site construction was paused last year due to concerns over project delivery.
Between 2023 and 2024, Shell invested $8bn in lower carbon options, including power, carbon capture and storage, hydrogen, and low-carbon fuels. Despite this investment, the production of biofuels, including Sustainable Aviation Fuel (SAF), remains two to three times more expensive than conventional jet fuel.
Hydroprocessed esters and fatty acids, though generally more cost-effective, are still more expensive than conventional fuel. The main production pathways for biofuels, power-to-liquid or e-fuels, are costly due to their reliance on green hydrogen and captured carbon dioxide.
Incentives and demand signals in Europe are not yet strong enough to offset the premium attached to biofuels. Aviation, which accounts for around 3% of global CO2 emissions, has a more significant impact on global heating due to the burning of fuels in the upper atmosphere, including nitrogen oxides. The International Energy Agency states that this impact makes aviation's contribution to global heating worse than its CO2 volumes alone.
In March 2023, Shell also abandoned plans for a SAF project on Singapore's Bukom Island. Shell continues to believe that low carbon molecules, including biofuels, will underpin the future energy system.
In 2024, Shell revised its carbon emissions intensity target to a 15% to 20% reduction by 2030, down from 20%, as part of a strategy to balance shareholder returns and decarbonisation goals. Huibert Vigeveno, Shell's Downstream, Renewables and Energy Solutions Director, made a statement about temporarily pausing on-site construction last year.
This decision underscores the challenges faced by the energy industry in transitioning to a low-carbon future while maintaining affordability and competitiveness. Shell's focus on investing in lower carbon options, while carefully evaluating the competitiveness of each project, reflects a strategic approach to this transition.
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