Viewpoint: HVO capacity growth to test feedstock supply

Market: Biofuels
17/12/21

Decarbonisation pledges have increased during a landmark year for global climate diplomacy with the UN's Cop 26 climate conference, with investment in biofuels positioned centre stage of many transition plans. Asia-Pacific in 2022 will see an intensifying scramble to buttress feedstock supply chains ahead of several hydrotreated vegetable oil (HVO) capacity additions the following year, although shifting regulations may constrict supplies.

Shell has announced plans for a 550,000 t/yr HVO and sustainable aviation fuel (SAF) plant as part of its rebranded Pulau Bukom site in Singapore.

The facility, if the investment is finalised, will join a host of others in the vicinity vying for regional waste feedstocks.

The plant will share a gateway with HVO indicator Finnish biofuels refiner Neste, which is on track to double its Singapore capacity to 2.6mn t/yr in the first quarter of 2023. South Korean biodiesel producer Dansuk is seeking a partner to invest in a second 300,000 t/yr domestic HVO and SAF plant in Gusan, on top of a similar 300,000 t/yr Daesan project already under way for a 2025 start-up.

Chinese producers are lining up sooner for expansions, although run rates have continued to lag well below capacity in 2021. ECO Environmental planned to add 100,000 t/yr of HVO and SAF capacity to its existing 250,000 t/yr plant in Jiangsu province in the fourth quarter of 2021. Beijing Sanju in 2022 expects to open its fourth HVO plant with 200,000 t/yr in Baoshun, Shandong province, while Zhongdiyou New Energy aims to increase its Shandong capacity up to its nameplate 400,000 t/yr.

An additional 200,000 t/yr of fatty acid methyl ester biodiesel capacity at Jiaao's Zhejiang plant will also increase feedstock demand in 2022.

Adding to the competition will be unrelenting policy-driven demand growth from European HVO and biodiesel producers. Their demand for used cooking oil (UCO) will grow by 260,000t from a year earlier to 4.94mn t in 2022, according to Argus Analytics and Consulting, while "other" feedstocks comprising mainly palm oil mill effluent (POME) will rise by 1.2mn t to 3.9mn t. POME is designated as advanced under Annex IX, Part A of the EU's Renewable Energy Directive II, a category that receives ratcheting sub-targets to 2030 under EU legislation.

Policy barriers, bridges

While many large-scale producers are eager to secure limited feedstock supply lines through acquiring upstream collection companies in China, no known acquisitions have emerged. Local government policies promoting "closed loop" systems might make this increasingly difficult.

South China's Guangzhou became the latest municipality to issue measures on food waste management at the end of October 2021, joining Shanghai in ruling that unprocessed waste oils cannot be shipped out and must be processed to boost value-added industries within the city. Other smaller municipalities will possibly be eyeing Guangzhou's policy, which is the most comprehensive released so far, when forming their own regulations.

Traction on a national level has grown behind proposals to rescind China's current value-added tax rebate for UCO exports submitted by domestic biodiesel producers. Continuing discussions between the customs administration and finance ministry have yet to deliver, which many market participants see as reflecting the UCO industry's relative unimportance to Beijing with exports to just surpass 1mn t in 2021. But if UCO tax benefits are revoked as participants expect in the medium term, it will benefit HVO plants' access to raw materials by squeezing smaller overseas UCO methyl ester plants out of China's feedstock market.

Southeast Asian expansion

Expansion in Southeast Asian UCO sourcing will possibly continue after exports from Malaysia, Indonesia, Thailand and Vietnam all reached new highs in 2021.

But it might only be a matter of time before more insular policies emerge in some of these countries as well, especially Indonesia as it pursues ever more ambitious domestic biodiesel policies of its own.

The promise of EU part A frontrunner POME to fill in feedstock supply gaps may be tempered by tightened audit regulations for mills producing the waste oil from 2022, spurring higher costs that could deter new suppliers from entering the market.

By Lauren Moffitt

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28/03/25

ISCC aware EU mulling certification recognition: Update

Adds comment from the European Commission London, 28 March (Argus) — The ISCC, an international certification system for sustainability, said today that it is aware of discussions in an EU committee about future recognition of its certification for waste-based biofuels. It said there is no legal basis for any planned measures. Industry participants said yesterday that the EU Committee on Sustainability of Biofuels, Bioliquids, and Biomass Fuels is drafting implementing regulations that would include a two-and-a-half year pause to obligatory acceptance of ISCC EU certification for waste-based biofuels. "This action is said to be subject to further legal scrutiny and will need approval by member states," the ISCC said. Currently, member states accept EU-recognised voluntary scheme certification as proof that fuel or feedstocks are compliant with the bloc's Renewable Energy Directive (RED) sustainability criteria. Market participants told Argus that discussions have centred around giving individual countries more choice. "Other voluntary schemes would not be able to fill the gap. The measure would be a severe blow to the entire market for waste-based biofuels and would seriously jeopardise the ability of the obligated parties to comply with blending mandates," the ISCC said. The ISCC has been singled out in a discriminatory way and has supported European Commission and member states' investigations into alleged fraud, it said. "We are more than surprised by this step […and] are unable to see the rationale of the planned measure, which seems ad hoc and baseless," it added. Secretary-general of the European Biodiesel Board (EBB) Xavier Noyon told Argus that, if confirmed, the suspension would affect thousands of operators. "At this time, member states are refusing to comment, and we call on the commission to urgently clarify any decisions of this nature that are on the table," he said. The EBB published its own proposed revision to the RED implementing legislation last month, which expanded the supervisory power of member states over voluntary schemes and certification bodies. The European Commission confirmed that the committee met on 26 March to discuss sustainable certification, promotion of biofuels, avoidance of double counting, and alleged fraud. "We are still working on our examination of this alleged fraud in biodiesel imports from China," said commission energy spokesperson Anna-Kaisa Itkonen. But the commission has not taken any decision yet and cannot allude to "possible" scenarios, she said. By John Houghton-Brown, Simone Burgin and Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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ISCC aware of EU talks on certification recognition

28/03/25

News

28/03/25

ISCC aware of EU talks on certification recognition

London, 28 March (Argus) — The ISCC, an international certification system for sustainability, said today that it is aware of discussions in an EU committee about future recognition of its certification for waste-based biofuels. It said there is no legal basis for any planned measures. Industry participants said yesterday that the EU Committee on Sustainability of Biofuels, Bioliquids, and Biomass Fuels is drafting implementing regulations that would include a two-and-a-half year pause to obligatory acceptance of ISCC EU certification for waste-based biofuels. "This action is said to be subject to further legal scrutiny and will need approval by member states," the ISCC said. Currently, member states accept EU-recognised voluntary scheme certification as proof that fuel or feedstocks are compliant with the bloc's Renewable Energy Directive (RED) sustainability criteria. There has been no official statement from the European Commission but market participants told Argus that discussions have centred around giving individual countries more choice. "Other voluntary schemes would not be able to fill the gap. The measure would be a severe blow to the entire market for waste-based biofuels and would seriously jeopardise the ability of the obligated parties to comply with blending mandates," the ISCC said. The ISCC has been singled out in a discriminatory way and has supported European Commission and member states' investigations into alleged fraud, it said. "We are more than surprised by this step […and] are unable to see the rationale of the planned measure, which seems ad hoc and baseless," it added. Secretary-general of the European Biodiesel Board (EBB) Xavier Noyon told Argus that, if confirmed, the suspension would affect thousands of operators. "At this time, member states are refusing to comment, and we call on the commission to urgently clarify any decisions of this nature that are on the table," he said. The EBB published its own proposed revision to the RED implementing legislation last month, which expanded the supervisory power of member states over voluntary schemes and certification bodies. By John Houghton-Brown and Simone Burgin Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Oil, biofuel groups meet to align on RFS policy

27/03/25

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27/03/25

Oil, biofuel groups meet to align on RFS policy

New York, 27 March (Argus) — Energy and farm groups met last week at the American Petroleum Institute to negotiate a joint request for President Donald Trump's administration as it develops new biofuel blend mandates, according to five people familiar with the matter. The private meeting involved groups from across the supply chain, including representatives of feedstock suppliers, biofuel producers, fuel marketers, and oil refiners with Renewable Fuel Standard (RFS) obligations. The groups coordinated earlier this year around a letter to the Trump administration on the need to update the RFS and are now seeking agreement on other program elements. According to the people familiar with the matter, the groups agree on pushing the Environmental Protection Agency (EPA) to set higher blend mandates under the program's D4 biomass-based diesel and D5 advanced biofuel categories. Groups support slightly different volume targets that are nevertheless all in "a rounding number of each other" in the D4 category, according to one lobbyist. But there is still disagreement about whether to ramp up mandates quickly in 2026 or provide a longer runway to higher volumes. Clean Fuels Alliance America and farm groups have publicly supported a biomass-based diesel mandate of at least 5.25bn USG starting next year, which could justify a broader advanced biofuel mandate above 9bn USG, according to the people familiar, though others worry about fuel cost impacts if mandates spike so quickly. The current mandate for 2025 is 7.33bn USG in the advanced biofuels category, including a 3.35bn USG mandate for the biomass-based diesel subcategory, so the volumes being pushed for future years would be a steep increase. The RFS, highly influential for fuel and commodity crop prices, requires oil refiners and importers to blend annual amounts of biofuels into the conventional fuel supply or buy Renewable Identification Number (RIN) credits from those who do. The idea behind the groups' coordination is that the Trump administration might more quickly finalize RFS updates if lobbyists with a history of sparring over biofuel policy can articulate a shared vision of the program's future. One person familiar said the effort comes after the Trump administration directed industry to align biofuel policy goals, though others said they understood the coordination as largely voluntary. EPA did not provide comment. There is less agreement around the program's D6 conventional biofuel category, which is mostly met by corn ethanol. Oil groups have in the past criticized EPA for setting the implied D6 mandate at 15bn USG, above the amount of ethanol that can feasibly be blended into gasoline, though excess biofuels from lower-carbon categories can be used to meet conventional obligations. Ethanol interests support setting the D6 mandate even higher than 15bn USG, which could be a tough sell. The discussions to date have not involved targets for D3 cellulosic biofuels, a relatively small part of the program. A proposal to lower 2024 volumes has hurt D3 credit prices, signaling that future mandates are effectively optional, according to frustrated biogas executives , and has reduced the salience of the issue for other groups. A proposal from President Joe Biden's administration to create a new category called "eRINs" to credit biogas used to power electric vehicles has similarly not come up. "We're not expecting to see any attempt to include eRINs in this next [RFS] proposal," Renewable Fuels Association president Geoff Cooper told Argus earlier this month. The meeting last week was largely oriented around the RFS, though a National Association of Truck Stop Operators representative raised the issue of tax policy too. The group has been frustrated by the expiration of a long-running blenders credit and the introduction this year of a less generous credit for refiners, which is only partially implemented and has spurred a sharp decline in biomass-based diesel production. But others involved in negotiations, while they acknowledge tax uncertainty could hurt their case for strong mandates, are trying to avoid contentious topics and focus mostly on volumes. Republican lawmakers are separately weighing whether to keep, repeal, or adjust that credit to help out fuel from domestic crops, and there is no telling how long that debate might take to resolve. Another thorny issue discussed at the meeting is RFS exemptions for small refineries. Biofuel producers strongly oppose such waivers and say that exempted volumes should at least be reallocated among facilities that still have obligations. Oil groups have their own views, though it is unclear how involved the American Fuel and Petrochemical Manufacturers — which represents some small refiners and has generally been more critical of the RFS than the American Petroleum Institute — are in discussions. EPA is aiming to finalize new volume mandates by the end of this year , people familiar with the administration's thinking have said, though timing for a proposal is still unclear. Future conversations among energy and farm groups to solidify points of unity — and strategize around how to downplay disagreements — are likely, lobbyists said. RIN prices rally Speculation over the trajectory of the RFS, and the potential for higher future volumes, supported soybean oil futures and widened the bean oil-heating oil (BOHO) spread. The BOHO spread maintains a positive correlation with D4 RIN prices as a widening value raises demand for D4 credits as biofuel producers look to offset higher production costs. Thursday's session ended with current-year ethanol D6 credits valued between 79¢/RIN and 82¢/RIN, while their D4 counterparts held at a premium and closed with a range of 84¢/RIN to 89¢/RIN. These gains each measured more than 5.5pc growth relative to Wednesday's values. By Cole Martin and Matthew Cope Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Virgin, Qatar airlines partner on Australia SAF project

27/03/25

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27/03/25

Virgin, Qatar airlines partner on Australia SAF project

Singapore, 27 March (Argus) — Privately-held airline Virgin Australia and state-owned carrier Qatar Airways will partner with bioenergy firm Renewable Developments Australia (RDA) on a sustainable aviation fuel (SAF) project near the city of Charters Towers in northern Queensland state. The project seeks to build an alcohol-to-jet (AtJ) facility with a nameplate capacity of 96mn litres/yr of SAF to be supplied to nearby airports, most likely to terminals at Townsville and Cairns city. The refinery is in the pre-final investment decision stage and is aiming to reach first output in early 2029, according to RDA. "Our SAF facility will be a fully integrated production site, generating sustainable fuel from bioethanol derived from locally grown sugarcane," RDA managing director Tony D'Alessandro said on 27 March. SAF by-products will be used to generate renewable power on-site and increase sustainability credentials, RDA said. Qatar last year agreed to buy a 25pc stake in Virgin , Australia's second-largest airline, with plans to increase international flights to Australia using Qatar planes wet leased by Virgin approved last month. The development comes after Virgin last week agreed to a deal with Australian refiner Viva Energy to operate services from the town of Proserpine in north Queensland using a SAF blend for several months this year . North Queensland's sugar industry has attracted interest from other developers of AtJ plants, including Australian bioenergy developer Jet Zero's 113mn l/yr Project Ulysses at Townsville, which has attracted funding from investors including Australian carrier Qantas, Airbus and Japanese energy conglomerate Idemitsu Kosan. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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UK eyes 80pc maritime emissions cuts by 2040

26/03/25

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26/03/25

UK eyes 80pc maritime emissions cuts by 2040

London, 26 March (Argus) — The UK is aiming to reduce fuel lifecycle greenhouse gas (GHG) emissions in its domestic shipping by 30pc by 2030 and 80pc by 2040 compared with 2008 levels, reaching zero by 2050. The goals are "intentionally ambitious", the UK government said, and will be supported by both domestic and international policy measures as set out in its new maritime decarbonisation strategy. The first phase of the strategy "will rely on existing IMO regulation" to improve vessel efficiency this decade, the government said. The second phase will centre on larger vessels. One key policy in the strategy is pricing maritime emissions, which the government expects to do through a combination of pushing for the IMO to introduce a global shipping GHG levy from 2027, and the government's existing plan to extend the UK emissions trading scheme (ETS) to domestic maritime emissions from next year. The government will "work to understand how these schemes interact, and to avoid any double charging of emissions", it said. It is still to consider the feedback to its recent consultation on technical elements of the sector's inclusion in the UK ETS, it added. The government also intends to regulate maritime fuel use, both by pushing for IMO-level standards this year on the GHG intensity of fuels, and implementing domestic UK fuel regulations on which it plans to consult in 2026. Calls for evidence were also published alongside the strategy on both potential requirements for zero or near-zero at-berth emissions, with a formal consultation on this planned next year, and on measures to support the decarbonisation of small vessels and targeted maritime sub-sectors. For the latter, the government expects to focus on vessels "with a clear route to decarbonisation". "Measures for harder-to-decarbonise vessels may not be required until the mid-to-late 2030s," it said. Maritime emissions accounted for 8pc of the UK's transport emissions in 2022, despite having declined by 30pc compared with 1990 levels, government data show. By Victoria Hatherick Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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