Singapore green jet fuel target ignites regional market interest, but sourcing concerns remain

Global demand for sustainable aviation fuel still outstrips supply, in part keeping prices sky high. Challenges in sourcing raw materials in biomass-rich Southeast Asia could lead to tensions and competition.

Singapore airshow 2024 jets
Jets on display at Singapore Airshow 2024. The city-state announced a sustainable air hub blueprint, which includes a 1 per cent sustainable aviation fuel target for 2026, financed through a passenger levy. Image: Singapore Airshow.

Singapore has become the latest country to announce its intention to buy sustainable aviation fuels (SAFs), joining a small group of nations – and an even more exclusive Asian club – in the growing but nascent market.

On Monday, the Civil Aviation Authority of Singapore (CAAS) said the city-state would aim for all flights to depart Singapore with 1 per cent SAF in their tanks from 2026, increasing to 3 to 5 per cent by 2030, subject to positive market development. Passengers will be charged a levy, and may find a trip to Bangkok costing S$3 (US$2.20) more, and to London, S$16 (US$11.90) more.

The levy is meant to fund a centralised procurement strategy aimed at lowering costs compared to if individual airlines negotiated their own deals. The approach has won plaudits from airlines and is expected to encourage higher SAF production in the coming years, but it has also raised concerns on short-term supply challenges and the complexities of sourcing raw materials in the biomass-rich Southeast Asian region.

SAF, which can be made from waste products such as used cooking oil or agricultural refuse and is seen as the most promising way to green commercial flying today, is about three times more expensive than conventional kerosene, due to technical and logistical complexities, along with the fuel’s high demand. 

Janos Ambros Reyes, chairman of Philippines-based consultancy AeroStrategies, expects Singapore’s move to temporarily add to the existing SAF supply crunch.

“Not everyone would be happy with it, there could be a bit of a market shock, but I think the market would adapt and eventually [Singapore’s SAF target] will be good for supply,” Reyes said, adding that major airlines, even in countries without SAF targets, are already studying procurement options.

One beneficiary of Singapore’s scheme could be smaller airlines, which without bulk purchase schemes could find it difficult to enter SAF markets on their own, said independent aviation analyst Brendan Sobie.

“It is kind of levelling the playing field, because it opens up access to every carrier, rather than just the big ones,” Sobie said.

Singapore’s aviation authority did not specify the volume of SAF it is looking to procure in 2026 to make up the targeted 1 per cent blend. But as an estimate, drawing from data from private sector climate group First Movers Coalition, a hundredth of Singapore’s 2019 peak jet fuel consumption of 5.3 million tonnes would be 53,000 tonnes. 

Demand for commercial aviation had tanked after 2019 due to the Covid-19 pandemic, full recovery is only expected from this year onwards.

SAF is expected to contribute to 0.5 per cent of global jet fuel supply this year, at 1.5 million tonnes, according to the International Air Transport Association (IATA). Analyst S&P Global Commodity Insights estimates the volume could rise to 3.5 million tonnes next year.

But much of the supply is expected to be used within the European Union, which has mandated the use of SAF starting at 2 per cent in 2025, rising to 70 per cent by 2050. Aviation executives at Singapore airshow this week questioned the availability of SAF for the region.

“I don’t know where you are going to resource 1 per cent SAF in Changi, from existing feedstocks,” said Riyadh Air operations chief Peter Bellew, adding that in the longer run there could be more supply from novel synthetic propellant made from hydrogen fuels. Singapore authorities have said the 1 per cent target for 2026 is realistic, though the final volume purchased could change based on market development.

CAAS director general Han Kok Juan said Singapore is working with neighbouring countries to unlock potential SAF supply. Singapore is home to the world’s largest SAF production plant built by Finnish oil refiner Neste, which can make a million tonnes of the fuel a year, but the city-state is looking to diversify its supplies to ensure resilience, Han added.

Prof Shamsul Kamar Abu Samah, chief executive of the National Aerospace Industry Corporation Malaysia, said Singapore’s SAF plans creates “a lot of room” for mutual learning and support between the two countries.

“If we can find a way to collaborate on the technology, research and business aspects, it is going to be something good not only for our country, but also for the region, Shamsul said.

Malaysia currently houses three SAF ventures that could start production by 2026, including a refinery project involving national oil company Petronas, with a 12,500 barrels (approx 1,750 tonnes) per day capacity for SAF and other biofuels.

Malaysian authorities have indicated that the country’s biofuels capacity will first go towards meeting domestic demand. The country is also understood to be firming up national SAF targets.

Palm oil in the spotlight

Industry players at the Singapore airshow also highlighted the high amount of biomass present in the Southeast Asia region, which could be used to make jet fuel but whose sustainability credentials have come under fire. In particular, Malaysia and Indonesia are the world’s top palm producers.

When asked about the use of palm oil for SAF, CAAS’s Han reiterated Singapore’s stance that the country will follow standards set by the International Civil Aviation Organization (ICAO) and its Corsia global carbon offsetting programme. Better research and understanding will “open up the sources available for use, which is very critical for the physical supply of SAF, along with stabilising and bringing down the price”, Han said.

Corsia recognises palm oil and its production residue as SAF feedstocks. However, the European Union bans palm oil-based SAF, citing deforestation risk the crop brings. 

Reyes of AeroStrategies said palm-based products should be used as a stepping stone before more novel alternatives come into the market, adding that it is important for the industry to “get going” on building the SAF ecosystem.

Shamsul said that palm residue should be prioritised. The use of palm oil – the plant’s main commodity – requires deeper studies on whether greater demand from the aviation sector would cause a price spike, he said.

“We use [palm oil] for our day-to-day life, so we don’t want to simply increase its value without considering the requirements of our people,” he said.

Nonetheless, fuel producers are being pressed to increase the supply of SAF, as the aviation sector faces greater scrutiny over its carbon emissions. Interim measures such as more efficient air traffic management are not expected to significantly dent greenhouse gas output, while electric and hydrogen-powered planes are too far off in the horizon. SAF can help cut carbon emissions by 80 per cent.

Addressing a conference on the sidelines of the Singapore airshow, William Walsh, IATA director general, said the aviation industry “will not be allowed to grow” without proving that it is sustainable.

“Every bit of [SAF] that gets produced would be used, because this is an existential issue,” he said.

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