Shell Pauses Biofuels Project Amid Tough Market Conditions

Market Watch’s Louis Goss reported that “Shell on Tuesday said it had temporarily halted construction of a major biofuels production facility in the Netherlands, in a bid to ensure it is able to produce competitively in the face of an anticipated flood of sustainable fuels into the market from the U.S.”

“The London-headquartered company first committed to building the 820,000 tonnes per annum biofuels production facility in September 2021, in line with plans it first announced in 2020 to transition into an entirely net zero carbon emissions business by 2050,” Goss reported. “Shell has now decided to ‘temporarily pause on-site construction work’ at its planned facility in Rotterdam to ensure ‘future competitiveness given current market conditions,’ the company said in a statement.”

“‘Temporarily pausing on-site construction now will allow us to assess the most commercial way forward for the project,’ Shell’s downstream, renewables and energy solutions director, Huibert Vigeveno, said,” according to Goss’ reporting.

Pause Comes Amid Tough Market Conditions

Reuters’ Ron Bousso reported Tuesday that “biofuel prices have come under pressure in recent months due to weaker demand in Europe, including after Sweden cut a biofuel mandate, and rising supplies in the U.S. The market is expected to remain well supplied in the coming years as more production comes on line, analysts said.”

“Shell said in a statement that following the decision to pause construction, ‘contractor numbers will reduce on site and activity will slow down, helping to control costs and optimise project sequencing,'” Bousso reported. “UBS analyst Joshua Stone said the pause was consistent with Shell’s strategy to focus on returns.”

“‘The delays further highlight that the advanced biofuels market is not an easy one. The oil majors have dipped their toes and found it challenging,’ Stone said,” according to Bousso.

The University of Illinois’ Scott Irwin wrote on the social media platform X that “this is a major announcement in the SAF/RD space. The big question to me is how such sophisticated players got so far out over their skis with such multi-billion dollar investments?”

Not toot my own horn, but we predicted the bloom was already off the biofuel boom more than a year ago in our “RIN Cliff” article. See the receipts here: https://t.co/sulwYx1t0T https://t.co/9CWgYqSg5e

— Scott Irwin (@ScottIrwinUI) July 2, 2024

Shell Announcement Comes on Heels of Other Pauses

Bousso reported Tuesday that “while it is rare for companies to suspend development of projects underway, rival BP also said last week it was pausing two biofuel projects in Germany and the U.S.”

Aviation Week’s Graham Warwick reported that “BP plans to take full ownership of its Brazilian biofuels joint venture (JV) but is scaling back plans to develop new sustainable aviation fuel (SAF) and renewable diesel production projects in Europe and the U.S.”

“BP has paused two new biofuel projects in Lingen, Germany, and Cherry Point, North Carolina,” Warwick reported. “‘At both of these we will instead focus on co-processing of biofeedstocks in the current refineries,’ the company says. BP will continue to assess three projects at its sites in Kwinana, Australia; Rotterdam, Netherlands; and Castellon, Spain.”