Shell has halted construction on one of its most significant energy transition initiatives, a large-scale facility in Rotterdam designed to transform waste into sustainable aviation fuel and biodiesel.
Delayed Production and Cost Concerns
The plant, which received approval in 2021, was initially slated to commence production this year. However, Shell announced on Tuesday that it would “temporarily pause” construction to manage costs.
The company also revealed plans to conduct an impairment review for the project and provide an update during its July quarterly results.
European biofuels markets have faced pressure from Chinese imports, causing widespread repercussions throughout the industry. Shares in Neste, a Finnish biofuels specialist, have experienced a significant decline of nearly half this year.
Shell’s Strategic Response
Huibert Vigeveno, Shell’s downstream, renewables, and energy solutions director, explained that the temporary pause allows Shell to assess the most commercially viable path forward for the project.
While sustainable fuels remain a “key part” of Shell’s strategy, the company intends to allocate resources in a “measured and disciplined way.”
Biofuels are considered more environmentally friendly than fuels refined from crude oil. This is because the carbon dioxide emitted when biofuels are burned is offset by the carbon dioxide absorbed by the plants from which they are derived.
Rotterdam Plant’s Potential
The Rotterdam plant, located at Shell’s Pernis refinery, was designed to produce approximately 820,000 tonnes of biofuels annually, divided between sustainable aviation fuel and biodiesel.
The feedstocks for this production included used cooking oil and animal fats, with the potential for supplementation using certified sustainable vegetable oils.
At the time of its announcement, Shell projected that the plant would produce enough biodiesel to reduce emissions by 2.8 million tonnes of carbon dioxide annually, equivalent to removing a million cars from the road.