Sustainable aviation fuel (SAF) producer Velocys has committed all of its output from the 22mn USG/yr (63,000t/yr) Bayou Fuels project in Mississippi to offtake agreements with Southwest Airlines and IAG.
The Bayou plant is scheduled to become operational in 2026 and will produce biojet and naphtha from waste woody biomass using Velocys' Fischer-Tropsch (FT) reactors. The project will incorporate carbon capture and storage (CCS), which Velocys said will allow for commercial-scale production of SAF with a negative carbon intensity of -144g CO2e/MJ.
Southwest Airlines has committed to buying 219mn USG (630,000t), or around two thirds of the facility's planned output, at a fixed price over a 15-year term starting in 2026. After blending with conventional A1 jet, this will enable around 575mn USG of net zero SAF. Each gallon of SAF produced at Bayou will generate tradeable greenhouse gas (GHG) credits for which Southwest Airlines guarantees a minimum price to Velocys, derisking a significant proportion of the revenue stream to the SAF plant.
Velocys and Southwest have also established a long-term strategic relationship, potentially allowing for future Velocys SAF-producing facilities and allowing Southwest first offer rights on output from them. Earlier this year, Southwest singed an initial agreement with US refiners Marathon Petroleum and Philips 66 to facilitate development and production of commercialised SAF.
The remaining third of Bayou's SAF has been committed under an initial agreement with IAG. This covers the purchase by IAG's constituent airlines, including British Airways, Aer Lingus and Iberia, among others, of around 73mn USG (210,000t) at a fixed price over a 10-year period starting in 2026. After blending with conventional jet, this will produce the equivalent of around 192mn USG of net zero SAF. The initial agreement also includes an option for IAG to invest in the project's development phases, and a price support mechanism by IAG for the GHG credits associated with the SAF production.
IAG has committed to powering 10pc of its flights with SAF by 2030.
Velocys is partnering with British Airways to build a waste-to-fuel SAF plat at Immingham, UK, which will process around 500,000 t/yr of non-recyclable household and commercial solid waste. Production is scheduled to begin from 2024.
