ANA inks deal to buy eco-friendly jet fuel from S'pore refinery

Plant expanding as demand rises for fuel made from waste vegetable, animal fats and oils

Despite the higher cost of sustainable aviation fuel, airlines cannot ignore the inevitable shift towards biofuels triggered by campaigns to tackle the effects of aviation on the environment, said Mr Hiroaki Sugimori, who manages ANA's sustainability
Despite the higher cost of sustainable aviation fuel, airlines cannot ignore the inevitable shift towards biofuels triggered by campaigns to tackle the effects of aviation on the environment, said Mr Hiroaki Sugimori, who manages ANA's sustainability department.PHOTO: REUTERS

Japan's largest airline has signed up for jet fuel made from renewable materials in Singapore, in a small step towards more eco-friendly travel that will add costs for an industry crushed by the coronavirus.

All Nippon Airways (ANA) signed a preliminary agreement to start buying so-called sustainable aviation fuel (SAF) from a Singapore refinery run by Finland's Neste.

The deal will be expanded from 2023 when Neste will have capacity to produce 1.5 million tonnes of SAF a year, ANA said in a statement.

The Singapore plant is being enlarged to meet increased demand for diesel and jet fuel produced from waste vegetable and animal fats and oils.

Airlines cannot ignore the inevitable shift towards biofuels triggered by campaigns to tackle the effects of aviation on the environment, said Mr Hiroaki Sugimori, who manages ANA's sustainability department.

The "Greta effect" - a reference to climate change campaigner Greta Thunberg - means airlines must adapt even if it involves higher fuel costs.

On Monday, Japanese Prime Minister Yoshihide Suga set an ambitious target for his country to be carbon-neutral by 2050 in his first policy speech to Parliament since taking office last month.

However, the timing for a shift to higher-cost, sustainable fuel could hardly be worse for airlines struggling to cope with the pandemic.

ANA yesterday forecast a record operating loss of 505 billion yen (S$6.6 billion) for the year.

Beyond the industry's struggle to survive, any shift to SAF will be hampered by scarce supply.

"There are a limited number of producers for SAF compared with the demand," said ANA's fuel procurement department manager Kohei Yoshikawa.

"As we looked into it, we began to realise that it's not easy to get."

In a test, ANA last Saturday received its first cargo of seven million litres shipped from one of Neste's European refineries to Haneda airport near Tokyo.

Global SAF production this year of some 40 million litres accounts for only 0.015 per cent of the jet fuel market, said the International Air Transport Association (Iata).

Yet, the group views SAFs as a key solution to curb the industry's emissions growth.

These non-fossil derived fuels must meet sustainability criteria, including reduced carbon emissions, limits on fresh water consumption, no deforestation and no competition with food production, according to Iata.

Asia has lagged behind other regions in terms of policy support as well as political pressure favouring SAFs, said Mr Robert Boyd, assistant director of aviation environment at Iata.

Asian interest in SAFs has been only sporadic, he said.

SAF has traded for several times the price of regular jet fuel in regions outside Asia in recent months.

In north-west Europe, the premium averaged 4.7 times the price of traditional jet fuel from mid-August, when S&P Global Platts started pricing SAF, to the middle of this month.

On the US West Coast, the premium was 3.5 times from mid-September to mid-October. Platts has yet to launch SAF prices in Asia.

ANA's senior director of fuel procurement Noriaki Muranushi does not expect SAF to "spread in popularity" without government support in the form of subsidies or incentives for domestic SAF producers, as well as airline consumers.

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A version of this article appeared in the print edition of The Straits Times on October 28, 2020, with the headline 'ANA inks deal to buy eco-friendly jet fuel from S'pore refinery'. Print Edition | Subscribe