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Shell has paused construction at one of its biggest energy transition projects, a huge plant in Rotterdam that was intended to convert waste into jet fuel and biodiesel.
The plant, which was given the green light in 2021, was already behind schedule because of technical difficulties. Originally slated to start production in April, Shell said earlier this year it would be operational “in the latter part of the decade”.
On Tuesday, Shell said it needed to “temporarily pause” work “to address project delivery and ensure future competitiveness given current market conditions”. The company declined to comment on how long the delay would be.
Wael Sawan, chief executive, has insisted that Shell must become more disciplined and value-focused. The company said it would run an impairment review for the project and give an update at its quarterly results in July.
Europe’s biofuels markets have come under pressure from oversupply, as companies rush to produce fuels that will be important during the energy transition, even though demand has yet to significantly grow. Shares in Neste, a Finnish biofuels specialist, have tumbled by almost half this year.
“Temporarily pausing on-site construction now will allow us to assess the most commercial way forward for the project,” said Huibert Vigeveno, Shell’s downstream, renewables and energy solutions director. Sustainable fuels remained a “key part” of Shell’s strategy, he added, but the company would spend money in a “measured and disciplined way”.
Shell commissioned the Australian engineering group Worley to design the project and contracted the Chinese company Shanghai Yanda Engineering to build the modules for the plant at its factory in Jiangsu province.
Biofuels are considered more sustainable than fuels refined from crude oil because the carbon dioxide emitted when they are burnt is offset by the carbon dioxide absorbed by the plants they were made from.
The Rotterdam plant, at Shell’s Pernis refinery, was designed to produce about 820,000 tonnes of biofuels a year, split between sustainable aviation fuel and biodiesel, from used cooking oil and animal fats. It is likely that Shell would also have supplemented the plant with certified sustainable vegetable oils.
When it was announced, Shell said the facility would produce enough biodiesel to reduce emissions by 2.8mn tonnes of carbon dioxide a year, the equivalent of taking a million cars off the road.
https://www.ft.com/content/1230623b-7a3f-4111-8c2b-4fbcd76b361b
