Indonesia to require SAF for flights from 2027

: Biofuels, Emissions
24/09/19

Indonesia will require flights to use sustainable aviation fuel (SAF) in their fuel mix from 2027, the Co-ordinating Ministry for Maritime Affairs and Investment announced on 18 September during the Bali International Air Show.

International flights departing Indonesia will be required to use 1pc SAF in their fuel mix, or an estimated 60,000 kilolitres (kl), in 2027. This will rise to 2.5pc by 2030, 12.5pc by 2040, 30pc by 2050, and 50pc, or a projected 7.88mn kl, by 2060.

The country's SAF roadmap and policy action plan was also announced on 18 September, and will be implemented as a Presidential Instruction by September. Used cooking oil (UCO) and palm fatty acid distillate (Pfad) were cited as prioritised feedstocks, although other potential feedstocks like palm oil-based feedstocks, coconut, and seaweed will be explored as well.

Crude palm oil (CPO) was identified as the alternative SAF feedstock that is most widely available within Indonesia, with a current excess supply of 16.5mn t after energy and food use, which can be converted into 13.3mn t of SAF. But SAF produced from CPO is estimated to have life cycle emissions of 77-99 gCO2/MJ, above the International Civil Aviation Organisation (ICAO), US and EU standards, limiting its global marketability. Indonesia aims to establish a taskforce to further engage ICAO on this, over a maximum of two years.

SAF Action Plan

A 2025-29 Action Plan was also announced, with three main policy pillars of demand, supply and enablers which were mentioned earlier in the year.

Notable points under the supply pillar includes securing enough domestic feedstocks for SAF production via the hydroprocessed esters and fatty acids (HEFA) pathway – which included a proposed domestic market obligation (DMO) for Pfad, and export quota and/or tariff for UCO. Emission-based incentives for SAF and exploring SAF production through other pathways, like alcohol-to-jet, were also mentioned.

The country's Ministry of Investment said that the country has potential to produce up to 1.72mn kl of SAF, 8.03mn kl of biodiesel, and 1.76mn kl of bioethanol, based on the Strategic Investment Downstream Roadmap over 2023-2040.

Under the enablers pillar, there are plans to appoint a national accreditation body for SAF certification and a domestic SAF certification ecosystem.

Under the demand pillar, the country aims to implement pilot SAF offtake agreements for international flights from Ngurah Rai International Airport, and to increase the SAF mandate at Ngurah Rai, the Soekarno-Hatta International Airport, and other major airports. It also plans for an SAF usage mandate for corporate and government travellers.

South Korea previously announced a 1pc SAF mandate in August for international flights, while Japan proposed stricter rules for domestic SAF producers to cut greenhouse gas emissions from jet fuel use in June, with the discussions to be finalised later this year.

By Sarah Giam

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24/12/27

Viewpoint: Consolidation looms in US methanol

Houston, 27 December (Argus) — The sale of Netherlands-based OCI's methanol production assets to rival producer Methanex is set to shift the market, with US methanol production most affected by the move. Methanex in the third quarter of 2024 announced the $2bn acquisition, which is expected to close in the first half of 2025. The boards of directors of both companies and OCI's shareholders approved the transaction, but it is subject to regulatory approvals. OCI operates the 1mn t/yr OCI Beaumont plant and is a 50:50 partner in Natgasoline, a 1.7mn t/yr joint-venture plant between OCI and Proman. Methanex operates three plants in the US, all in Geismar, Louisiana. These plants carry a collective 4mn t/yr capacity and represent one-third of total US methanol capacity. At front and center of the acquisition is the Natgasoline plant in Beaumont. Natgasoline, when operational, represents 14pc of domestic production. The plant opened in 2018, and throughout those six years, the plant has seen its share of operational issues. The most recent was a fire at the reformer unit in early October, resulting in a complete shutdown lasting nearly three months. When the deal was announced, Methanex made it clear that the transaction was subject to approvals by OCI shareholders, as well as a pending legal decision between OCI and Proman. "If it is not settled within a certain period, Methanex has the option to carve out the purchase of the Natgasoline joint venture and close only on the remainder of the transaction," the company said in September. Methanex and OCI declined to give further details, as the deal is still pending. Proman did not respond to a request for comment. If it goes through, the acquisition would result in the exodus of OCI from the US methanol market. But the issue of liquidity in the US spot barge market is also looming. Market participants said OCI is a frequent buyer when the Natgasoline plant goes down. In October, when Natgasoline was completely shut down, 340,000 bl of methanol moved for delivery at ITC, the terminal on the Houston Ship Channel where methanol is exchanged, according to Argus data. Market participants expect liquidity to be about the same until some time after the deal closes. When a plant goes down, a producer will emerge in the spot market for purchases. In the longer term, there are some questions around international distribution and where US methanol exports find a home. Methanex is a major exporter to Asia, whereas OCI sells into the European market. The low-carbon methanol sector will also experience some shakeup. OCI is a major participant in the bio-methanol space, selling volume into Europe. Methanex produces carbon-captured methanol, also known as blue methanol, which has not penetrated the EU market. By Steven McGinn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: California-Quebec carbon faces murky 2025

24/12/27

Viewpoint: California-Quebec carbon faces murky 2025

Houston, 27 December (Argus) — The joint California-Quebec climate market, known as the Western Climate Initiative (WCI), is on tenterhooks going into 2025, stymied by rulemaking delays but on the cusp of a more mature phase. Both California and Quebec are eyeing more-stringent future programs and have floated a series of changes over the past year and a half designed to achieve those goals. The California Air Resources Board (CARB) is considering moving its program's mandate from the present 2030 target of a 40pc reduction in greenhouse gas (GHG) emissions, compared with 1990 levels, to a 48pc reduction to keep the state on target to meet its 2045 goal of net-zero emissions. In line with this increased ambition, CARB will need to remove at least 180mn metric tonnes (t) of allowances from the 2026-2030 auction and allocation annual budgets to start with, and up to 265mn t in total from the program budgets from 2026-2045. CARB has floated other changes , including toughening corporate relationship disclosure requirements, increasing the program's cost-containment allowance price tiers and updating a portion of the program's carbon offset protocols. Quebec has considered removing 17.5mn t of allowances, which correspond to carbon offset uses for compliance in the province over 2013-2020. The Quebec Environmental Ministry proposed to address this by removing these allowances from the province's 2025-2030 auction budgets in a November 2023 workshop. Quebec is also mulling changing the current three-year compliance period to align with statutory 2030 and 2050 GHG targets. But this a move that California, which had discussed similar compliance period changes in April , has not revisited since. Quebec is considering tapering the limit for carbon offset use for compliance in the province by 2030 and transitioning over to a provincial reduction purchase mechanism in 2031, although regulators have not gone in-depth on how a replacement system would function. The WCI rulemakings have been marked by a series of delays over this year, pushing past projections from the end of last year that it would finalize program changes by the second half of 2024. Quebec, which was set to deliver a draft of program amendments in September, rescheduled to early 2025, with implementation expected in spring 2025. While the regulation was nearly complete in late September, the Quebec Environmental Ministry chose to postpone, since it cannot publish before California, said Jean-Yves Benoit, the agency's director general of carbon regulation and emissions data. CARB has signaled it intends to publish its package of rulemaking amendments in early 2025. The agency on 19 December confirmed it expects to "complete and release the regulatory package for a 45-day public comment period" in early 2025 but did not explain the delay. The agency may be waiting for a formal extension of the cap-and-trade program when the legislature resumes on 6 January. California lawmakers have given CARB explicit authority to utilize a cap-and-trade system to reduce GHG emissions out to 2030. CARB maintains it has authority to operate a cap-and-trade program past 2030, but program participants have stressed the need for formal certainty around the program to aid future planning. CARB will begin invoking the post-2030 budgets starting in 2028 for the program's advance auctions. The various delays have compressed the timelines California and Quebec must achieve their statutory target ambitions, making 2025 a potentially pivotal year. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: SE Asian IMO2 MRs to rise on EU policy

24/12/27

Viewpoint: SE Asian IMO2 MRs to rise on EU policy

London, 27 December (Argus) — Rates for specialised Medium Range (MR) tankers in southeast Asia will be driven up in 2025 by changes in EU policy on deforestation, higher biofuels blending mandates, and new mandates in the aviation sector, all of which will support exports of biodiesels, feedstocks and palm oil. Demand for specialised MRs in southeast Asia is ruled by exports of palm oil to Europe and the US Gulf coast. Palm oil does not usually need to travel on IMO2 ships and can be moved on IMO3 vessels. But it is often moved as a part-cargo of between 5,000-15,000t so is often picked up by IMO2 or IMO2/3 vessels, which are more suitable as they have a higher number of segregated tanks. Kpler data show around 6.3mn t of palm oil was exported from Indonesia and Malaysia to the US Gulf and Europe in the January-November 2024 period. Palm oil deliveries from southeast Asia have been trending lower since 2020 with the product becoming less popular in Europe because of deforestation issues. On 4 December, an agreement was reached between the European Council and the European Parliament to delay the application of the EU Deforestation Regulation (EUDR) by one year. This means larger companies will not be required to prove that their products, such as palm oil, did not contribute to deforestation until 30 December 2025. This has averted a potential rapid loss in palm oil exports to Europe in 2025 but there will probably be a substantial decline in exports later in the year as businesses prepare for the EUDR. In the short term, the decision to postpone the EUDR will probably boost cargo numbers heading to Europe as traders had been holding off for clear regulatory guidance. This will support freight rates for IMO2 MRs in the new year by pulling more IMO2/3s and IMO3s away from the market and by increasing the number of part cargoes available for IMO2s. Feedstock exports ramp up Indonesia and Malaysia also export many specialised products that require IMO2s, such as waste based feedstocks palm oil mill effluent (POME), palm fatty acid distillate (PFAD) and used cooking oil (UCO), as well as finished biodiesels like Ucome. Kpler puts exports of these products to Europe at around 2.8mn t in the first 11 months of 2024, with POME cargoes making up 42pc of all shipments or around 1.2mn t. POME was included in Annex IX Part A of the EU's renewable energy directive (RED), meaning member states can count it twice towards their renewable energy goals. Exports of feedstocks and biodiesels to Europe will probably rise in 2025 as blending mandates rise and because of a reduction in the carryover of emissions tickets in Germany and the Netherlands. Argus estimates European demand for biodiesel Pomeme to rise by around 36pc on the quarter in first three months of 2025 to around 3.5mn litres. Higher requirements for biofuels and feedstocks in Europe should push up demand for products like POME, PFAD, and UCO from Malaysia and Indonesia and support higher IMO2 demand in southeast Asia. But this could be tempered by an Indonesian ruling to include an export permit for POME and PFAD that requires participants to fulfil their cooking oil domestic market obligation. SAF mandates begin in Europe Exports of HVO and SAF from Singapore to Europe also make up part-cargo demand for IMO2 MRs. Argus forecasts European HVO demand will rise by 85pc on the quarter to 2,582mn l in the first three months of 2025. New 2pc SAF mandates in the EU and UK in 2025 will provide a sizable rise in SAF demand. This should spur a jump in cargoes loading from Singapore — driving up demand for part-cargo space on IMO2 MRs. By Leonard Fisher-Matthews Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Policy doubts hit Australia's biofuel sector

24/12/27

Viewpoint: Policy doubts hit Australia's biofuel sector

Sydney, 27 December (Argus) — Australia's biofuels sector has garnered significant interest during the first 2½ years of the current federal Labor government, but uncertainty over key policy support measures has stymied investment and led developers to question whether 2025 will be a year of reform. Labor secured its first majority government since 2007 in the mid-2022 election and subsequently pledged to cut Australia's greenhouse gas emissions by 43pc on 2005 levels by 2030. But the country is not on track to meet this ambitious target because of slow progress decarbonising its electricity and transport sectors. Biofuels have become increasingly popular, given decarbonising hard-to-abate transport industries is seen as key to reaching the 2030 goal. Canberra has committed to a low carbon liquid fuels (LCLF) standard, which the industry views as crucial to enabling investment in processing, refineries and new feedstock crops. In its May 2024 budget, the federal government expressed a desire to develop sustainable aviation fuel (SAF) and renewable diesel (HVO) industries. The outcomes of consultations are expected to be released imminently. On the demand side, a regulatory impact analysis of the costs and benefits associated with mandates for LCLF has been promised, but no timeframe has been released. Domestic refiners Ampol and Viva, as well as BP at its former Kwinana refinery, have expressed interest in biofuel production but all require certainty on demand and supply-side support mechanisms. Australian bioenergy developer Jet Zero and a consortium including major airlines aim to build a 113mn litres/yr plant in the northern part of Queensland state, but initial engineering for the concept has not yet been completed. The consortium plans to convert bioethanol from domestic agricultural byproducts like sugarcane molasses into SAF and HVO through the alcohol-to-jet pathway, with production expected to start in 2027. Jet Zero is also planning to produce SAF through the Hydrotreated Esters and Fatty Acids (HEFA) production pathway in a 50:50 joint venture with Aperion Bioenergy. But the project, which is still in its feasibility stage, is facing hurdles in pricing the feedstock offtake agreements or term contracts. Complicating the picture, heavy transport is now showing greater signs of electrification, as demonstrated by iron ore producer Fortescue's major order for new electric haul trucks. Regardless, the introduction of new safeguard mechanism laws requiring large emitters to reduce pollution has led Australia's fuel companies to increase HVO sales, with 500,000l contracts now signed on a regular basis despite the higher costs. Australian coal mining firm Stanmore has tested a 20pc HVO blend at its Bowen basin Poitrel mine, demonstrating an increasing acceptance of biofuels by customers. Ampol and Viva both sell fatty acid methyl esters (Fame) based biofuel blends at 5pc, 10pc and 20pc. Ampol has two projects in the pipeline: a co-processing facility that would supply up to 60mn l/yr by 2026 and the Brisbane renewable fuels joint venture, which would be a larger project of 0.5bn-1bn l/yr and is due for a final investment decision by late 2025. Viva has been less forthcoming about its plans for biofuel production since it announced a new biofuel blending venture at its 120,000 b/d Geelong refinery in 2023. There will be a federal election no later than mid-May 2025 and both major parties are keen to enhance their green image while supporting regional communities and manufacturing jobs. New regulatory support is crucial if Australia is to transition from supplying significant quantities of feedstock for biofuels to other countries, particularly tallow and canola seed, to producing its own renewable fuels. Australia's increasing reliance on imported oil products and foreign crude, along with a worsening geopolitical backdrop, has started to raise concerns in Canberra. This could be the deciding factor in whether the government will create the required regulatory environment for a local biofuels industry to thrive. By Tom Major and Tom Woodlock Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Unified CO2 market remains in distance

24/12/26

Viewpoint: Unified CO2 market remains in distance

Houston, 26 December (Argus) — Washington state's carbon market enters 2025 on steadier ground than it stood on for much of the past year, but still faces hurdles before it is part of a larger North American market. Washington's cap-and-invest program has weathered a year of highs and lows between advancing its ambitions to link with the Western Climate Initiative and operating through much of the year under threat of repeal in the November state elections. The state Department of Ecology director Laura Watson began the state's quest to link with the WCI last year , as regulators looked to the larger, more liquid market to potentially temper the higher-than-expected prices over the first year of the market in 2023. Washington Carbon Allowances (WCAs) for December 2023 delivery surged as high as $70/t last year, according to Argus assessments. But the state has clinched several wins for its program this year. State lawmakers were able to pass a bill to smooth out several areas of potential incompatibility with the WCI earlier this year, along with California and Quebec agreeing to move forward into formal linkage talks in March . But a repeal effort, initiative 2117, seeking to remove the state's cap-and-invest program dampened prices and forward movement on linkage since January. WCAs for December 2024 delivery fell to the lowest price to date for the program at $30.25/t on 4 March, according to Argus assessments, as uncertainty over the future of the program quieted market participation. State voters backed the cap-and-invest program in November with 62pc against the repeal effort, but months of uncertainty has cost the state time and linkage progress as the WCI awaited the November results. Additionally, while Washington started its own linkage rulemaking in April to align the program with changes planned for the WCI, finishing it requires the joint market first finalize its own changes. The linkage logjam has left market participants feeling that the state's momentum is stalled for the moment, even as perception of the state's eventual joining remains a question of "when" not "if." Ecology says it remains in communication with the WCI members and is evaluating the impact of California's new rulemaking timeline. California has indicated over this year that it does not intend to focus fully on linkage until its current rulemaking is complete. Ecology estimates it will adopt its new rules in fall 2025, with the earliest the state could expect a linkage agreement in late 2025. Washington must still complete further steps required by state law before any linkage agreement can proceed, including an environmental justice assessment and a final evaluation of a potential joint market under criteria set by its Climate Commitment Act, along with public comment. California and Quebec must also conduct their own evaluations to comply with respective state and provincial laws. If this timing works out, Ecology would be part of joint auctions starting in 2026. Compounding the process is the potential threat posed by incoming president-elect Donald Trump, who is likely to try to reverse major environmental regulations and commitments. Trump sought ultimately unsuccessful litigation in his first administration to sever the link between Quebec and California in 2019. The administration pursued the case on the grounds that California's participation violated federal authority to establish trade and other agreements with foreign entities under Article I of the US Constitution, which sets out the role of the federal and state powers in commerce and agreements with foreign powers. Both California and Washington have undergone preparations in recent months to gird themselves for a legal fight with the incoming administration, and that may add further scrutiny to linkage for both states going forward, said Justin Johnson, a market expert with the International Emissions Trading Association. "I think that it will require them to be more vigilant about the process they use and making sure they dot their i's and cross their t's because I think that there will be some folks in the federal administration who would like to see that not happen," Johnson said. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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