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BP Acquires Stake in Chinese Sustainable Fuel Company

by Krystal

BP has acquired a 15% stake in a Chinese company focused on developing sustainable aviation fuel (SAF), an alternative to traditional jet fuel aimed at reducing the aviation industry’s carbon footprint.

The acquisition cost BP approximately $50 million, according to a report by Bloomberg, citing a statement from BP’s Chinese division. The investment is in the SAF unit of Zhejiang Jiaao Enprotech Stock Co., which is currently constructing a factory to produce sustainable aviation fuel. Once completed early next year, the facility will have an annual production capacity of 500,000 tons.

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Despite significant commitments from airlines and governmental backing for SAF production, the transition from petroleum-based jet fuel to SAF faces several hurdles, including supply constraints, high costs, and limited feedstock availability, according to industry analysts.

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The International Energy Agency (IEA) has emphasized the need for substantial investments in SAF production capacity and the introduction of new policies, such as fuel taxes, low-carbon fuel standards, and mandatory blending, to boost SAF usage. The agency estimates that increasing SAF’s share from less than 0.1% of all aviation fuels in 2021 to around 10% by 2030, in alignment with the Net Zero Scenario, will require significant efforts.

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The airline industry has expressed support for these changes but recognizes the challenges ahead, particularly concerning cost and production capacity. Due to these challenges, SAF production has yet to reach the levels necessary to make a significant impact on the aviation sector’s emissions.

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Meanwhile, major oil companies, including BP, have started to invest in biofuels and SAFs as part of a strategy to diversify away from their traditional oil-focused businesses. However, BP recently announced plans to scale back its biofuel and SAF ambitions in Europe and the United States, choosing instead to prioritize new oil projects.

Similarly, Shell has paused the construction of a biofuels and SAF facility in the Netherlands, further highlighting the difficulties faced by the SAF industry.

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