Renewables

Shell halts construction of biofuel refinery in Rotterdam to cut costs

Shell halts construction biofuel refinery Rotterdam cut costs

Photo: Chokniti Khongchum from Pixabay

Published

July 5, 2024

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Published:

July 5, 2024

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Shell is pausing construction works at its major biofuel facility in the Netherlands to adapt to market conditions. It is another one in a series of European energy companies that hit the breaks on green investments. Shareholders prefer core activities, faster profits and less intensive capital expenditures.

The European energy sector is apparently overinvested in green technologies. Shell joined a group of companies scaling back capital expenditure by suspending the construction of a giant biofuel plant.

Works in Rotterdam were launched in 2021 and the facility was supposed to start operations by now. But in the meantime the company pushed back the target date to 2025. It was facing technical delays. Now, with the latest decision, the plant is not expected to be finished until late this decade.

By suspending the biofuel refinery project, Shell aims to “maintain capital discipline”

Shell acknowledged it aims to “maintain capital discipline.” In the latest announcement, it said it expects impairments of USD 0.6 billion to USD 1 billion for halting construction in the Netherlands. The project is for the conversion of waste cooking oil and animal fat into sustainable aviation fuel (SAF) and biodiesel.

Contractor numbers will reduce on the site, activity will slow down and the investment will be reassessed, the company explained.

Demand growth weakening is pressuring biofuel prices downward. Last year Shell scrapped an investment in SAF production in Singapore. Additionally, it said it is cutting headcount by at least 200 people in its low-carbon division. It is affecting the segments of offshore wind power and hydrogen.

Thus, Shell is concentrating more on its fundamentals: oil and gas.

Statkraft narrows its green energy targets

Similarly, BP, formerly known as British Petroleum, has just decided to hold off on any new offshore wind investments. It also put its two biofuel projects in Germany and the United States on ice.

Green energy is mostly capital intensive, with many uncertainties regarding returns. Especially in new technologies like renewable hydrogen and synthetic fuels. Therefore, shareholders have been demanding more core activities and faster profits.

The Norwegian state-controlled utility is shifting its focus back on hydropower in the home market

Statkraft has cut its green energy targets. The new targeted annual additions of solar power, onshore wind and battery storage are 2 GW to 2.5 GW in combined capacity from 2026. It compares to between 2.5 GW and 3 GW from 2025 and 4 GW per year from 2030, from the previous update.

The Norwegian state-owned energy company aims to develop 6 GW to 8 GW of offshore wind by 2040. It earlier aimed to reach 10 GW. Statkraft slashed the green hydrogen goal to between 1 GW and 2 GW by 2035, as previously it was pushing to reach 2 GW by 2030.

Instead it is focusing on the expansion of the core business, hydropower, in the home country. The utility said it would look to add investors for its biofuel business Silva Green Fuel and electric vehicle charging network operator Mer. It would help lower risk and maintain the investment pace.

HELLENiQ Energy warns of grid crunch, curtailments

On the other side of the continent, HELLENiQ Energy is hitting the brakes, too, citing unclear European and domestic investment landscape. The Greek company is revising the growth of its renewables portfolio.

Chief Executive Officer Andreas Shiamishis told shareholders serious challenges are affecting the green energy segment. Nevertheless, the company will lean more on synergies, he suggested.

The European Union needs a comprehensive strategy with a step-by-step approach to climate and energy targets, the CEO underscored. He highlighted curtailments and grid limitations and said renewables can’t expand without the development of the power network. There is no specific debate on the matter “except for some general positions which, however, have no practical effect,” Shiamishis asserted.

New technologies require caution, in his view. It doesn’t mean that someone who moves first would win, on the contrary – they are likely to lose, the company head warned.

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