Shell pauses construction on major biofuels plant in Netherlands

Shell is to pause building work on one of Europe’s largest biofuel plants following a slowdown in demand growth for the low-carbon fuelling method.

The site in Rotterdam in the Netherlands is due to produce 820,000 tonnes of biofuels per year when it is complete.

It is the latest low-carbon energy project to be shelved by an energy giant in recent times as firms increasingly pivot back towards their most lucrative operations – oil and gas – to boost profits.

Last week, BP said it would pause two biofuel projects in Germany and the US.

Wael Sawan, Shell’s chief executive since January 2023, has overseen a raft of rollbacks in such operations, scrapping parts of its hydrogen business and selling down stakes in several renewables projects.

Temporarily pausing on-site construction now will allow us to assess the most commercial way forward for the project

The company’s share price has risen 12% this year.

Biofuels are typically made of plant waste or animal fats and are sometimes blended with traditional fuels like petrol or diesel to power planes, trains and cars.

Airlines have leaned heavily on jet biofuel, or sustainable aviation fuel (SAF), as a way to market flights as being low carbon.

Virgin Atlantic described a flight from Heathrow to New York last year as “the world’s first net zero transatlantic flight” while the UK’s Department for Transport , which helped fund the project, described it as “guilt-free flying”.

Shell started work on its plant in the Netherlands in September 2021 and it was meant to start producing sustainable aviation fuel and renewable diesel by 2025.

The July 2 announcement indicates that it is less confident about the biofuels market than before, citing “current market conditions” as the reason for pausing work on the Dutch site.

Shell said in a statement that “contractor numbers will reduce on site and activity will slow down, helping to control costs and optimise project sequencing”.

“Temporarily pausing on-site construction now will allow us to assess the most commercial way forward for the project,” said Huibert Vigeveno, a director in Shell’s downstream, renewables and energy solutions arm.

“We are committed to our target of achieving net-zero emissions by 2050, with low-carbon fuels as a key part of Shell’s strategy to help us and our customers profitably decarbonise,” added Mr Vigeveno.

“We will continue to use shareholder capital in a measured and disciplined way, delivering more value with less emissions.”