Shell puts building of biofuel plant in Rotterdam on hold

Oil giant Shell has temporarily halted the construction of a biofuel factory in Pernis, near Rotterdam (Netherlands) – one of Europe’s largest biofuel plants. The pause should give the company space to assess the best commercial path forward for the project.

It is the latest low-carbon energy project to be shelved by an energy giant as firms increasingly pivot back toward their most lucrative operations – oil and gas – to boost profits.

Shell made the investment decision for the new factory in 2021. At that time, the location was expected to be ready in 2024. Construction started in September 2021, and the plant was scheduled to produce sustainable aviation fuel (SAF) and renewable diesel by 2025. However, due to declining demand, the timing now is postponed to the second half of this decade.

Focus on money for shareholders

The plant was intended to produce 820,000 tons of SAF and renewable diesel annually, thus contributing to sustainability. However, the actual market conditions are disappointing. Demand for biofuels from aviation is still low and not expected to pick up until the end of the decade. Hence, the July 2nd announcement to pause the building.

However, activists see another explanation: When Shell announced the construction of the factory in 2021, oil prices were low. Today, the cost of oil is relatively high, making it more profitable to invest in. Shell’s strategy seems to be more focused on making money for shareholders.

Climate-neutral by 2050

It is not the first time Shell has slowed down on greening. Last March, the company announced it wants to reduce greenhouse gas emissions by 15 to 20% by 2030, but the goal of emitting 45% less greenhouse gases by 2035 was scrapped. Shell, however, still promises that it will be climate-neutral by 2050.

Huibert Vigeveno, the director of the refineries division: “We are committed to our target of achieving net-zero emissions by 2050, with low-carbon fuels as a key part of Shell’s strategy to help our customers and us profitably decarbonize.”

Doubts about investing in biofuels

Biofuels are typically made of plant waste or animal fats and are sometimes blended with traditional fuels like gasoline or diesel to power planes, trains, and cars. In the factory in Pernis, Shell would convert used (frying) fats, agricultural waste, and slaughterhouse waste into biofuel.

Shell is not the only oil multinational that doubts investing in biofuels. Last week, its British counterpart BP said it was halting two biofuel production projects in Lingen, Germany, and the United States.