Shell pauses construction of Rotterdam biofuels plant

Shell said today it has temporarily halted construction of its 820,000 t/yr biofuels facility in Rotterdam, Netherlands to "address project delivery and ensure future competitiveness given current market conditions".

The facility is designed to produce sustainable aviation fuel (SAF) and hydrotreated vegetable oil (HVO) — also known as renewable diesel — from waste feedstocks.

"We're taking the tough decision now to temporarily pause on-site construction. This gives us the opportunity to take stock, complete engineering, optimise project sequencing, and in doing so maintain capital discipline," Shell told Argus.

Additional information on the project status and timelines will be communicated in future updates, the company said.

The Argus used cooking oil (UCO)-based fob Amsterdam-Rotterdam-Antwerp (ARA) range sustainable aviation fuel (SAF) price averaged $2,441.44/t in the first half of 2024, around 19.5pc down from a year earlier.

Although SAF demand in Europe is generally trending higher, supply from within the region and from east of Suez has increased at a faster pace so far this year, weighing on prices.

Norway, Sweden and France already have SAF mandates in place. Demand is otherwise largely voluntary beyond these three markets, although some airports such as London's Heathrow are implementing their own initiatives to boost SAF uptake.

An EU-wide and a UK SAF mandate are due to come into effect in 2025.

The Argus UCO-based HVO (Class II) fob ARA range assessment was also lower in the first part of 2024 compared with a year earlier, averaging $1,646.14/t, a 23pc decline compared with January-June 2023.

Sweden's decision to slash the domestic greenhouse gas (GHG) emissions reduction mandate for diesel and gasoline to 6pc for the 2024-26 period, from 7.8pc for gasoline and 30.5pc for diesel in 2023, has played a key role in shifting the European HVO balance this year. The volume of HVO blended into diesel dropped by nearly 92pc in the first four months in 2024 compared with the same period last year, according to preliminary figures from government data provider Statistics Sweden. The share of HVO blended into diesel was just 2pc in January-May this year, compared with around 25pc a year earlier.

Low renewable fuels ticket prices also contributed to keeping a lid on HVO demand and prices.

Shell reached final investment decision on the plant in September 2021.

Last year the company cancelled plans to set up a biofuel unit in Singapore, which was designed to produce 550,000 t/yr of SAF, HVO, and renewable chemicals.

By Anna Prokhorova