Shell Aviation, World Energy to supply sustainable aviation fuel to Lufthansa at SFO; ink multi-year collaboration

From the UK comes news that Shell Aviation and World Energy inked a collaboration to develop a scalable supply of sustainable aviation fuel. The agreement is intended to be a multi-year collaboration, with both companies acknowledging that the path to lower carbon emissions in aviation requires long-term commitment and collaboration.

The Lufthansa buy

As part of the collaboration, Shell Aviation and World Energy also announced that they have initiated the supply of SAF to Lufthansa Group at San Francisco International Airport. The supply will reduce Lufthansa’s carbon emissions on intercontinental flights on three routes operated by Deutsche Lufthansa and Swiss International Air Lines from SFO to Frankfurt, Munich and Zurich.

The deal represents one of the most significant SAF supply contracts globally, with up to one million gallons of SAF to be supplied to Lufthansa over the duration. It is the largest contracted SAF volume to be delivered to SFO since the airport announced its ambition to expand the use of SAF in its operations last year.

The production backstory

The SAF is produced by World Energy at its refinery in Paramount, California, from a feedstock of agricultural waste fats and oils. This CARB-certified and RSB-certified Low Carbon Fuel  meets strict sustainability standards and is blended with conventional jet fuel at a ratio of up to 30%, resulting in a fuel that has significantly lower lifecycle carbon emissions. In general, lifecycle carbon emissions from SAF can be at least 80% lower than conventional jet fuel.[3] SAF is supplied to airports through existing airport infrastructure and can be used by airlines without requiring technical modification to their current fleets.

The World Energy backstory

In October 2018 we reported that World Energy announced a $350 million investment over the next two years to complete the conversion of its Paramount, California facility into one of the cleanest fuel refineries in the world. The project will enable World Energy Paramount to process 306 million gallons annually. The conversion to renewable jet, diesel, gasoline and propane will reduce both refinery and fuel emissions while supporting more than 100 advanced, green economy jobs.

“This project will transform the Paramount facility into California’s most important hub for the production and blending of advanced renewable fuels,” said Bryan Sherbacow, Chief Commercial Officer of World Energy, at the time. “This investment will better enable us to deliver much needed low-carbon solutions to our customers. Importantly, with 150 million gallons of annual renewable jet production capacity, World Energy will be able to help the commercial aviation industry combat its greenhouse gas emissions.”

The Shell backstory

Last month we reported that CMA CGM Group signed a partnership with Shell to supply tens of thousands of tons of marine biofuel to its fleet. This quantity, which is unique in the industry, will allow the Group’s ships to travel nearly 1 million kilometers, equivalent to over 80 round-trips between Rotterdam and New York, the company said in its release. The CMA CGM Group became in 2019 the first shipowner in the world to successfully test the use of a marine biofuel onboard the container ships CMA CGM WHITE SHARK and CMA CGM ALEXANDER VON HUMBOLDT.

The fuel used is composed of 80% of Low Sulphur Fuel Oil and 20% of a biofuel made of used cooking oil. The biofuel used reduces greenhouse gas emissions by 80% and virtually eliminates sulphur oxides emissions.

And in August we reported that British Airways and Shell invested nearly £3 million Velocys and that an application for planning permission to build an aviation biofuel production facility near the Humber in North Lincolnshire has been submitted for approval to local authorities. Half a million metric tons of MSW is expected to be used as feedstock annually at the proposed site.

We reported in December 2018 that Shell Aviation and SkyNRG had commenced the supply of sustainable aviation fuel (SAF) to international airlines KLM, SAS and Finnair at San Francisco Airport (SFO). The fuel is also produced by World Energy, currently the only SAF refinery worldwide.

The initial phase of that arrangement aims to pave the way for longer term, more resilient supply chains for sustainable aviation fuels and reduce the carbon emissions of flights from SFO and other airports. Following May’s agreement, Shell Aviation is the first major fuel supplier to support SFO in its ambition to expand the use of sustainable aviation fuel in its operations.

In April 2018, we reported that Shell released its most definitive statement yet on its low-carbon future and committed to 50% lower emissions by 2050 and net zero by 2070 in its operations and emissions from its fuels.  In its analysis of future energy demand, Shell noted that the global energy demand is set to increase from 570 exajoules to 1000 by 2070 and it will take extraordinary measures to meet the stringent carbon-reduction goals set in the Paris Agreement, while the world is increasing energy usage at the same time.

Reaction from the stakeholders

“Alongside new technologies and high quality carbon credits, sustainable aviation fuel – at scale – has a significant role to play in reducing carbon emissions for the aviation industry,” said Anna Mascolo, Vice President, Shell Aviation. “As well as bringing together the right mix of technical expertise and operational capability, commitments like this one provide a strong example and assurance to the industry that it is possible to fly and emit less.”

Gene Gebolys, Chief Executive Officer, World Energy, said: “We are thrilled to be working with Shell to advance their ability to empower industry leaders, like Lufthansa, to take action toward reducing their sector’s carbon footprint.  The shift to low-carbon fuels will not happen in a day and won’t be done alone, but today we are taking one more important step on a long journey together.  We are committed to making low-carbon fuels readily available to those who choose to act now and to lead the transition to a cleaner energy future.”

Thorsten Luft, Vice President, Deutsche Lufthansa AG, added: “The Lufthansa Group takes its responsibility for the environment very seriously and has already taken many initiatives to reduce the CO2 emissions of its aircraft. We have a long history of testing and supporting the development of sustainable aviation fuel, and are proud to be introducing it to our daily operations at San Francisco. This is just one of many initiatives to provide our passengers with lower carbon travel when they choose to fly.”

The Bottom Line

We rated hot action among purveyors of The Big Heavy (heavy duty road, marine, air) as our #1 prediction for 2020, and this deal, and the news this week that Jet Blue was initiating a big buy, too — that’s evidence that we were suspecting was about to surface. More to come, much more.