BP has acquired an interest in a Chinese company that develops sustainable aviation fuel-an alternative to jet fuel seen as a tool for lowering the emissions footprint of the air transport industry.
The stake represents 15% of the SAF unit of Zhejiang Jiaao Enprotech Stock Co. and cost BP around $50 million, Bloomberg reported, citing a statement by BP's Chinese unit.
The Chinese company is in the process of building a sustainable aviation fuel factory that will have an annual capacity of half a million tons. Construction should be completed early next year.
Despite numerous pledges from airlines and government support for SAF production, the alternative of the petroleum-based jet fuel faces challenges in supply, costs, and feedstock, analysts say.
According to the International Energy Agency, "increasing SAF use from less than 0.1% of all aviation fuels in 2021 to around 10% by 2030 in line with the Net Zero Scenario will require investment in production capacity and new policies such as fuel taxes, low-carbon fuel standards and mandatory blending."
The airline industry has signaled it was on board with the changes but, like the IEA, it has acknowledged the challenges, among which cost and production capacity appear to be the most serious.
Because of these challenges, SAF production has yet to take off in the amounts that the air transport industry needs to make a difference in its emissions footprint. Big Oil, however, has entered the biofuels and SAFs game in an attempt to diversify away from its core business. BP is not exception, but the company earlier this year said it would scale back its biofuel and SAF plans for Europe and the United States in favor of new oil projects.
A similar move by Shell which paused construction on a biofuels and SAFs facility in the Netherlands highlights the problems that SAFs production faces.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More