Finland's Neste Optimistic About SAF Demand in Middle East Amid Decarbonisation Efforts
11.10.2023 By Tank Terminals - NEWS

November 11, 2023 [N Business]- Finnish renewable-fuel producer Neste is hoping for a surge in demand for sustainable aviation fuel (SAF) in the Middle East, driven by airline companies’ efforts to decarbonise their operations, a senior official has said.

 

The company, which has production plants in Finland, the Netherlands and Singapore, currently has no plans to produce SAF in the UAE, a major aviation hub, Jonathan Wood, Neste’s vice president for Europe, the Middle East and Africa for renewable aviation, told The National.

“We have limitations as to how many new investment projects we can run at the same time but never say never.”

SAF, alternative fuels made from renewable sources that are used to power aircraft, is crucial for the global aviation industry to reach its net-zero goal by 2050. The aviation sector is responsible for about 2 per cent of global carbon-dioxide emissions.

However, its adoption is still in the early stages due to small-scale production and its higher cost than conventional fuel.

Neste, which produced 3.3 million tonnes of renewable fuels last year, aims to increase production capacity to 6.8 million tonnes by 2026, including 2.2 million tonnes of SAF.

Last month, Emirates, the world’s biggest long-haul airline, expanded its partnership with Neste for the supply of 3 million gallons of SAF in 2024 and 2025, as the carrier strives to reduce its carbon footprint.

The SAF will be blended with conventional jet fuel to power Emirates’ flights departing from Amsterdam Schiphol and Singapore Changi airports.

While the UAE is leading the Middle East in SAF demand and adoption, markets in the EU and the US are more “economically attractive” thanks to supportive policies, Mr Wood said.

“It’s not only about us and our ability to supply, it’s also about the different incentives that are available at moment,” he added.

The EU this year reached an agreement to set binding targets for European airlines to increase their use of cleaner fuel.

By 2025, suppliers must ensure 2 per cent of the fuel they provide at EU airports is sourced from clean fuels. This target will increase to 6 per cent in 2030, 20 per cent in 2035, and reach 70 per cent by 2050.

Mr Wood said he was confident prices of conventional jet fuel and SAF would converge over time, but he added: “I don’t know when they will get to the same point.”

“If we want to scale up [SAF production], not 1 or 2 or 10 per cent, but to 50 per cent, then we’re going to have to unlock new raw materials and new production technologies, which currently cost more,” Mr Wood said.

“On the one hand we will improve efficiency, [and] on the other side of the coin, as we increase the production to new feedstocks and technologies, that will maybe offset any efficiency gains,” he added.

Last year, the average SAF price estimate was about $2,400 per tonne, about two and half times higher than the price of jet fuel, according to the International Air Transport Association.

“It costs more but how much more really does it cost the passenger?” Mr Wood said.

“The airlines have a competitive market they have to compete within, so they rightly are super sensitive to this but we need to put that in context.”

In the UAE, Etihad Airways has committed to a target of net-zero carbon emissions by 2050 and halving its 2019 net emission levels by 2035.

Emirates this year earmarked $200 million to fund research and development projects focused on advanced fuel technology that can reduce commercial aviation’s environmental impact.

 

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