Latin America Emerging as Hot Spot for More Climate-Friendly Jet Fuel

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December 19, 2022

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by Allison Lampert and Oliver Griffin (Reuters) Latin America is drawing early investment for jet fuel produced from materials like forest residues and palm oil as emission-conscious airlines scour emerging markets for less-polluting fuel to power flights, industry executives say.

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While SAF is not currently produced in Latin America, Honeywell's (HON.O) Performance Materials and Technologies (PMT) unit is talking to companies about 12 proposed SAF projects in the region valued in the billions of dollars, up from three projects in 2018, an executive told Reuters.

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The U.S. company is working with Brazilian biodiesel producer ECB Group on an $800 million to $1 billion plant in Paraguay featuring SAF expected to be operational in 2025.

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In the near term, the industry sees SAF hitting 10% of the total by 2030, and the 2050 net zero emissions target relies on SAF accounting for 65%, which would require 450 billion litres annually.

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Producing and distributing SAF in regions with faster-growing traffic like Latin America is key to meeting industry targets, said Landon Loomis, Latin America president for U.S. planemaker Boeing (BA.N).

Brazil, the world's second-largest producer of biofuels, has more than enough feedstock such as sugar cane, palm oil and urban waste to cover its jet fuel needs annually, Loomis said.

Brazil also has the technology to produce SAF, which is harder to make than biofuels for cars, an official at the country's aviation regulator said. However, it lacks investment and government policy, which is still under review.

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The Export-Import Bank of the United States is interested in "underwriting and closing bankable projects that source renewable feedstocks" for SAF and renewable diesel, particularly in regions like Africa and Latin America, a spokesperson said.

Projects are springing up. Brazilian state-run oil company Petrobras (PETR4.SA) plans to produce renewable diesel and SAF, starting in 2028, while Brazilian ethanol producer Raizen (RAIZ4.SA) will produce SAF for planemaker Embraer (EMBR3.SA). And Vibra Energia (VBBR3.SA) is working with Brasil BioFuels (BBF) to produce palm oil-based jet fuel in 2025.

Some companies in neighboring Colombia, the largest palm producer in the Americas according to local industry group Fedepalma, are also looking at making jet fuel from the crop.

But cases of child labor and deforestation in palm oil market countries in southeast Asia have made it hard to win global support for the fuel, said Fedepalma President Nicolas Perez.

Faced with that perception, Colombian biofuels producer BioD is choosing to produce SAF with waste instead of palm oil, which it uses for domestic consumption, said spokesperson Carolina Betancourt. It is looking to raise $700 million to $1 billion in investment to open a SAF refinery by 2027.

Separately, Colombian palm oil producer Daabon is in talks for an estimated $1 billion project to make 500,000 tonnes of SAF a year from palm oil, using green hydrogen. The fuel would need to be eligible for airline use under ICAO's CORSIA deal, said project consultant Pedro Ruano.

Colombia, supported by the World Bank, is also undertaking a study to show its palm oil is not linked to deforestation and a suitable option for SAF, said Fedepalma's Perez. READ MORE

Latin America will be key in the production and supply of sustainable fuel for aviation -- Up to 200 billion liters of SAF has the potential to produce Latin America and the Caribbean, estimates IATA, which would mean 37% of the industry's fuel needs (Panama Financial Tuesday Magazine/Martes Financiero)

Brazil could be the “OPEC” of the new global aviation fuel (Gazeta Do Povo (Google Translation))

Boeing eyes Brazil as source for SAF supplies (Biofuels International)

Excerpt from Gazeta Do Povo (Google Translation): Brazil has land and know-how to lead SAF production

Brazil is among the few countries that, strategically, have the best conditions for the production of SAF, in its various technological routes. “We have land that other countries don't have and raw materials that other countries don't have either. It is possible to produce in an innovative way, but we need to start, because the maturation time for such a project is two to three years. We have everything to be the OPEC of sustainable aviation fuel production”, evaluates Marcela Braga Anselmi, head of the International and Environmental Advisory at the National Civil Aviation Agency (ANAC) . She points out that only the agricultural and forestry residues generated in the country would already be enough to produce all the SAF demanded by national and international flights that touch Brazilian soil, until 2030.

Large multinationals in the agro sector, such as Cargill, are closely monitoring the development of this market. “This has a great chance of being a future global commodity in which Brazil has everything to shine. This SAF can be obtained either from normal ethanol, from corn or sugarcane, or from biodiesel. On flights originating in places that are capable of producing SAF, such as the USA and Brazil, the tendency is to use 100% sustainable fuel”, points out Paulo Sousa, president of Cargill in Brazil.

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An important advantage of sustainable aviation fuels is that they comply with the drop-in concept, that is, they can be used in any existing engines and turbines. "The use of electric or directly hydrogen aircraft would require changing the existing fleet, which would be expensive and time consuming. To produce advanced aviation fuels we need a raw material of biological origin – such as vegetable oils, animal fats or ethanol – or we need green hydrogen, produced with renewable electricity. In both cases, Brazil is highly competitive.

Brazil's great potential comes precisely from this availability of competitive raw material, whatever it may be", points out João Guillaumon, partner at McKinsey consultancy .

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The replacement of the fossil matrix is mandatory by the International Civil Aviation Organization (ICAO), and should represent at least 65% of global aircraft consumption by 2050, which will allow the sector to reach the zero carbon target. Currently, however, SAF production only accounts for 3.5% of aircraft consumption. There are 14 billion liters in a universe of 390 billion. By 2050, when SAF becomes the standard fuel, 450 billion liters will be needed.

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The challenge is to be able to increase production exponentially, while trying to lower costs, which are up to 5 times higher than those of jet fuel. Installing a plant can take three to five years.

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In Brazil, the National Energy Policy Council (CNPE) instituted the Fuel of the Future Program in 2021 , to increase the use of sustainable and low-carbon fuels. Since then, the Ministry of Mines and Energy has promoted a series of work meetings with the main stakeholders in the aviation market to support a bill that will address, among other guidelines, the creation of a National Program for Sustainable Aviation Fuel (PROBIOQAV). The proposal is to start with a mandatory minimum reduction of carbon dioxide emissions by 1% by air operators, starting in January 2027, a percentage that can be increased by CNPE to up to 10% in the following ten years.

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The bill's draft is ready and should be discussed with Congress at the beginning of the next legislature. Instead of establishing a minimum mixture of SAF with aviation kerosene, as foreseen in another project, PL 1873/2021 , by Deputy Ricardo Barros, the executive opted for emission reduction targets through the use of SAF. In practice, this would prevent all airports from having to install physical fuel mixing points. Instead, there would be strategic, cost-effective fueling locations.

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The year 2027 will be a watershed year for sustainable jet fuel. Prior to that date, countries meet voluntary targets within the Carbon Offset and Reduction System for International Aviation ( CORSIA ). Then, the mandatory phase begins.

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In October, biofuel associations in South America signed a manifesto asking the governments of Argentina, Brazil, Colombia, Paraguay and Uruguay to comprehensively promote an energy transition strategy for the development of the sector, both for vehicular transport and for air, river and sea.

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The Omega Green complex, supported by the Paraguayan government under a Free Zone regime, will receive an investment of R$ 5 billion, and is the first advanced biofuel plant in the southern hemisphere. It will produce the so-called "green diesel" HVO, SAF from vegetable oils and green naphtha. Around 90% of the initial capacity, of 20,000 barrels/day of biofuel, has already been contracted by Shell and British Petroleum (BP). The main customers are in the US, Canada and the European Union. The same ECB group is also investing R$ 556 million in a wheat ethanol factory in Passo Fundo (RS).

On another front, Raízen, the largest sugarcane ethanol producer in the world (a joint venture between Cosan and Shell), signed an agreement with Embraer to develop the SAF production chain. The aircraft manufacturer's goal is to reach 2030 with its entire production line able to operate 100% with sustainable fuel. READ MORE