Velocys offtake deals with Southwest, IAG, SAF advancements from Enerkem, Honeywell, Twelve, Dallas Forth Worth airport
Velocys enters 15-year offtake agreement for 575 million blended gallons of SAF with Southwest Airlines
In Mississippi, Velocys plc’s wholly owned subsidiary, Velocys Renewables LLC, entered into its first offtake agreement for the SAF to be produced at the planned Bayou Fuels biorefinery project in Mississippi, USA, with Southwest Airlines Co. Alongside the offtake MoU with IAG, it represents a commitment for 100% of Bayou Fuels SAF.
The agreement covers the purchase by Southwest of an expected 219 million gallons of SAF at a fixed price, over a fifteen-year term starting as early as 2026, when the biorefinery is scheduled to begin commercial delivery of fuel. After blending, this will enable approximately 575 million gallons of net zero1 SAF.
The offtake agreement covers two thirds of the Project facility’s planned output and has the potential to generate multi-billion revenues over the life of the contract. Each gallon of SAF generated by the Project is expected to generate tradable greenhouse gas credits for which Southwest guarantees a minimum price payable to the Project (included in the fuel fixed price), de-risking a significant proportion of the revenue stream to the Project. The Project may additionally benefit from the value of greenhouse gas credits if sold above the minimum price by Southwest.
In addition, Southwest and Velocys have established a long-term strategic relationship as a part of the offtake agreement – potentially advancing future Velocys SAF-producing facilities and allowing Southwest first offer rights to purchase significant volumes of SAF from such facilities.
Through the combination of biogenic feedstock, renewable power and carbon capture and storage, Velocys’ carbon mitigation technology will enable the commercial-scale production of SAF at the Bayou Fuels plant with a strongly negative carbon intensity of up to -144g CO2e/MJ, which is expected to achieve a total of 6.5 million tonnes of avoided CO2 over the term of the contract.
Henrik Wareborn, CEO of Velocys, said, “Today’s announcement is a major milestone for the Bayou Fuels reference project and further strengthens our conviction in the important role sustainable fuel will play in the future of the aviation industry. It is very encouraging to see Southwest make such a strong commitment to using fossil free fuel as part of its environmental sustainability plan and to see Velocys technology performing a central role in making this possible. This unique long dated offtake, encompassing fuel purchases and sales of greenhouse gas credits, underpins the financing of the construction capital for the Project. This agreement shows that commercial scale demand for SAF can be satisfied already by the middle of this decade and that Velocys plays a pivotal role in enabling this.”
Stacy Malphurs, Vice President of Supply Chain Management & Environmental Sustainability for Southwest Airlines, said, “We’re excited to enter into a 15-year offtake agreement with Velocys, enabling Southwest to utilise negative carbon intensity SAF to produce significant quantities of net zero fuel after blending with conventional jet fuel. As we work toward our ultimate goal of carbon neutrality by 2050, this offtake agreement will play an important role in our strategy to reduce our carbon emissions intensity and incorporate SAF into our operations on our journey improve our environmental stewardship.”
Velocys enters 10-year offtake agreement with IAG for 73 million US gallons of carbon negative SAF
The MoU covers the purchase by IAG’s constituent airlines, which includes British Airways, Aer Lingus and Iberia amongst others, of an expected 73 million gallons of SAF, in aggregate, at a fixed price. After blending, this will produce the equivalent, under US regulations, of 192 million gallons of net zero SAF (blended basis) during the term of the purchase contract, which will last for ten years from 2026, which is when the Project’s biorefinery is expected to begin delivering SAF. It represents one third of the facility’s planned annual output and complements the binding offtake agreement for the remaining two thirds annual output announced with Southwest Airlines.
The intention of the parties is to convert the non-binding MoU, which includes all material terms for the offtake, into a definitive offtake agreement as soon as possible within the next six months; the MOU also includes an option for IAG to invest in the Project development phases.
The fixed price fuel purchase agreement includes a price support mechanism by IAG for the greenhouse gas credits associated with the SAF production. As a result, the agreement is expected to generate revenues of over $800M to the Project and achieve, under US regulations, an estimated total of 2.2 million tonnes of avoided CO2 over the term of the offtake.
The Velocys carbon mitigation technology will enable the commercial-scale production of a deeply negative SAF at the Bayou Fuels plant through the combination of biogenic feedstock, renewable power and carbon capture and storage.
Henrik Wareborn, CEO of Velocys, said, “We are delighted that IAG, our partner for many years through our work with British Airways, intend to purchase a large volume of SAF from the Bayou Fuels project. This long-dated offtake, encompassing support for environmental credits, will provide certainty of revenue for the Project which should enable construction capital financing. We have now secured long term offtake clients for 100% of the expected SAF production and associated environmental credits for the Bayou Fuels facility. Velocys’ focus is now on accelerating technology delivery with our partners to allow client facilities, including Bayou Fuels, to reach Final Investment Decision and then go into construction. Our capital-light, technology-licensing model will enable many more aviation clients to transition to Sustainable Aviation Fuel as required by the race to Net Zero.”
Luis Gallego, CEO of IAG, said, “IAG is investing US$400 million in the development of sustainable aviation fuel in the next 20 years. This new agreement is another important step towards achieving our goal of 10 per cent sustainable aviation fuel use by 2030. Sustainable aviation fuel is a critical element for the decarbonisation of the aviation industry. Clear policy support is needed to attract investment to construct the necessary plants to deliver enough supply for the airline industry. This project has benefitted from strong policy support from the US, creating highly valued green jobs and economic growth. We would encourage the UK and the EU to follow suit in supporting the development and deployment of green technologies including carbon capture.”
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