Oil Products: ARGUS sustainable aviation fuel (SAF) fob ARA

Oil Products: ARGUS sustainable aviation fuel (SAF) fob ARA

ARGUS SAF fob ARA price assessment

With more global carbon reduction mandates coming online and airlines looking to fulfill their environmental, social and corporate governance (ESG) requirements they will look to SAF to meet their needs. SAF is the only solution for airlines to fly more sustainably, electrification is not yet a solution and we are probably decades away from that being a reality if at all.

There are 7 different approved ways for making SAF, and the most commonly used is HEFA SAF, which is hydro-processed esters and fatty acids. The HEFA process is also used to make a type of renewable diesel, hydrotreated vegetable oil (HVO), and little refinery change needs to be made to produce SAF out of HVO. Therefore, HEFA SAF shares the same type of waste feedstocks used to make certain HVOs. HEFA SAF can be blended up to 50% into fossil jet.

As pressure grows on the aviation industry to decarbonize, three ways of regulating and incentivizing the industry:

  • European mandates:
    • Only Norway has a blending SAF mandate of 0.5% starting Jan 2020 (increased to 30% by 2030). The obligation is for the Norwegian based jet suppliers: 0.5% of their total yearly jet volume must be neat SAF (100%).
    • Sweden and Finland have announced similar mandates starting 2021.
  • Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA):
    • Cap net CO2 emissions to 2019 levels, voluntary 2021-2027 and then mandatory.
  • Opt-in mechanism:
    • This is an economic incentive by EU member states under the Renewable Energy Directive (RED) for suppliers to benefit from making SAF: for example, if a road biodiesel supplier decides to make SAF, they will be issued 20% more tickets (1.2 multiplier). Goal is to increase the volume of SAF produced and hopefully drive down the price.

North American crude forward curves

 

Advantages of the ARGUS SAF fob ARA assessment

The Argus SAF assessment is weekly and is based on actual market input, not a calculated price, and with a robust underlying HVO assessment from which SAF is accessed as a differential to. The Argus SAF assessment is more reflective of activity in the physical SAF market and based on SAF feedstocks.

Jet fuel

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