World SAF Marketplace Flow Oversupply Expected to Optional

This was one of the key findings of a contemporary webinar organized by Argus Media, a leading source of reports and pricing information for the petroleum market in addition to alternative commodities. Argus is a world supplier of knowledge, so the webinar spanned key markets, from Asia to North America and Europe, where SAF properties now have the strongest mandates.

In the world of markets, location does not matter in the long run. The feedstocks produced to make SAF can also be transported over long distances (although this is not the case in most cases); The decision a refinery makes about whether to produce jet gas or alternative petroleum products is actually influenced by many things; Monetary incentives, rather than mandates to build SAF and alternative renewable fuels in North America, could increase or cut prices, impacting options on pristine capacity for development or accelerating manufacturing at existing facilities.

Although it is typically the EU market, given its dimensions due to its mandates, Argus looks at whether the offer at the moment exceeds the demand when making its decisions.

Charles Jones, vice president of the consulting practice at Argus, said in the webinar that the chart showing increasing demand for SAF by 2050 is “clearly driven by legislation that will significantly increase demand over the next few decades to 2050.”

A significant ramp-up has already occurred.

“Right now, there is a little bit of overcapacity in terms of SAF production,” Jones said. “(That surplus) reflects the amount of investment being made in SAF in Europe over the last few years. “It creates a bit of a stir.”

However Jones said it would not be the last: “There is a big gap after 2035.”

Lewis Burke, who leads North American biofuels and international gliding trading for Argus, outlined the wave imbalance. Flow supply estimates range from 150 million to 175 million gallons per year, drawn from 500,000 metric lots. However last year the quantity of SAF was about 350,000 tonnes.

Looking ahead, Burke said the Argus database lists 195 plants worldwide that could produce SAF, amounting to a production of 9.5 billion gallons per year by 2028. This equates to about 620,000 barrels per day (b/d) for a market that now consumes about 7 million b/d of jet gas.

Argus estimates the field produced about 122 million gallons last year, equivalent to about 8,000 b/d, he said. So at the global level the percentage of SAF was once 0.1 to 0.2%.

“We obviously need to get a lot more supply online to meet the various blending mandates,” Burke said.

Burke also said that “co-refining”, sometimes called co-processing, is becoming a key component in supply. Co-refining is where an existing petroleum refinery will additionally create SAF and have it immediately mixed into petroleum-based jet gas. He cited a large dimension of ancient co-refining plants that have either opened or are in the planning stages, with several locations and major commercial names: BP, Repsol, Italy’s ENI, and SAF’s primary supply from China. .

Every other generation that can provide spice: from wine to jet. It takes alcohol molecules, the type that can now be additionally processed into ethanol, and turns them into SAF. An ancient plant, the first of its kind in Georgia, opened this year.

It is a financial truth that regulations and incentives can also be passed, however in the long run the market will succeed as it always does. And the question with SAF is whether the incentives and orders will create enough capacity for SAF production or whether the business will become smaller.

Sustainable gliding gas is a drop-in gas, so called because it can be a one-for-one replacement for petroleum-based jet gas. The jet gas is the part of the barrel called the center distillate, like diesel and heating oil. So the relative value energy of jet gas to diesel is a consideration when refiners decide to make additional diesel from their distillate “cut”, not more jet gas, or alternative approaches.

Governments seeking to transition away from petroleum and toward renewable energy pursue one of two paths, freeing refiners and customers from making choices based solely on markets.

One is the mandate. There are countless mandates on the subject of SAF, especially in Europe.

The Argus discussion board cited one of the main European economies as important. In Norway, a rule that airlines must avail 0.5% SAF has been in play since 2020. In France, a 1% mandate was introduced in 2022 and increased to 1.5% this year.

However emerging as a bigger issue is the EU’s Refuel EU programme. Initiative at the end of the year, gas “uplift” at airports within the EU should be 2% SAF. This proportion increased over time, to 6% by 2030, 20% by 2035, and 70% by 2050. This includes all flights originating from the EU, regardless of where they are going.

When the refueling program comes into effect, member states may no longer have their own mandate.

“Refueling will increase demand, investment and infrastructure for EU SAF, while reducing reliance on fuels with high carbon emissions,” notes World Industry Management’s assessment of US-EU laws. -Expected to ensure a level playing field and an equal and competitive environment that benefits both businesses and the climate.

Several Asian countries either have mandates in the playing field (China and Indonesia) or are listed by Argus as being proposed or under discussion.

US incentives to generate SAF in certain circumstances were not to be replaced by existing incentives that provide tax breaks for the production of any type of renewable fuel. There is no nationwide mandate like in the EU.

However the incentives are not across the entire country, even though some of them are.

For example, California Low Carbon Gas General encourages the manufacturing of transportation fuels with low carbon feedstock. While manufacturing low carbon gas generates credits, their dimensions depend on the entire carbon “life cycle” from feedstock to finished product.

This has resulted in renewable diesel – such as SAF, a drop-in gas – accounting for more than 50 percent of all diesel and in addition nearly all RD in the US has been eliminated in combustion. Nearby. This is because the credits generated from generating RD from animal fat in the process of eating the fat have been given a Carbon Moment cycle rating, which is marginally at the top of the scale, generating a fair amount of credits. Nearest credit can be offered.

SAF made from eating area grease or similar animal-based tallow will additionally provide a substantial collection of credits.

However, as a slide presented via a webinar presentation demonstrates, it is no longer that simple.

Via Argus As a source of hydrogenated esters and fatty acids, transient vegetable oils from vegetation – the formal name for a classification of SAFs – are in considerable supply, as is waste from spoiled cooking oil due to low availability and high feedstock prices. is indexed.

Jones noted, “There are big questions about whether currently readily used feedstocks are sufficient to meet that demand over the long term.”

This means the focus will need to shift to alternative critical supplies, such as municipal waste and agricultural residues, but where the technology is not sufficiently advanced to hand over a soft wave of supply.

Additionally, some executive laws appear unfavorable to positive feedstocks. As noted in the Argus presentation, SAF made from palm oil is not eligible to meet the upcoming EU mandate or generate credits under the California LCFS. as a piece of writing a parent As was famous last year, “Crop-based biofuels, once considered renewable, are now contributing to deforestation and emissions declines.”

Some alternative incentives within the US had been on the playing field for some years. Renewable Gas The general, rule of thumb that calls for ethanol in gas produces a Renewable ID Number (RIN) that can be offered the closest, similar to LCFS credits. This is a calculation that will come into play on the question of whether or not to build a SAF plant because the construction of SAF produces RINs.

And to emphasize that month-of-the-month decisions on SAF crops will be driven by economics, regardless of how many mandates are in the market, it has to be noted that RIN prices are sometimes so volatile – like LCFS. The buzzword in the credit-markets is “sanity.” This is not a reflection of stability.

John Kingston has a nearly 40-year career defending commodities, the majority of which has been in the S&P World Platts. He created the Dated Brent benchmark, which is now the region’s most noticeable crude oil marker. He was once Director of Oil, Director of Information, lead writer for Platts Oilgram Information, and the “talking head” for Platts on various media outlets, including CNBC, Fox Trade and Canada’s BNN. Before joining Platts he covered metals and spent about a year running Platts’ metals industry. He was awarded the World Association of Power Economics Award for Excellence in Written Journalism in 2015. In 2010, he received two Company Success Awards from McGraw-Hill, an extraordinary achievement, one for directing the safety of the BP Deepwater Horizon disaster and one for producing the People’s Affairs TV display, Platts Power Debt.