Sustainable aviation fuel: Premium holds steady

The sustainable aviation fuel (HEFA-SPK) premium was unchanged on the week as spot liquidity was thin in the ARA market.

Selling interest on a fob ARA range basis was reported as high as $3,400/t by some during the week, but bids were heard to be lower. And a deal for a 3,000t UCO-based HEFA SAF cargo that had been discussed at around $3,500/t fob China fell through, according to traders.

Prices for UCO were little changed on the week as activity remained subdued in the ARA hub, though some in the market said prices were trending upwards in China as supply was tightening.

And the Class II HVO price firmed on the back of three deals done in Friday's afternoon window, with the premium strengthening for the first time since early December.

The SAF premium to the SAF-escalated 7-28 days Ice gasoil price was unchanged on the week at $1,760/m³. The outright was set at $3,344.74/t, which equates to a premium of around $2,330/t to the 1-27 January jet fuel average.

Efforts to scale-up new SAF production technologies continue globally. This week a consortium led by Abu Dhabi's state-owned Masdar, in collaboration with TotalEnergies, Siemens Energy and Japan's Marubeni said it is looking for approval to produce SAF from methanol to expand the existing Alcohol-to-Jet pathway. Masdar also announced a collaboration with Abu Dhabi's Adnoc and Ethiad Airlines, waste management company Tadweer and BP to conduct a feasibility study to explore the production of SAF from renewable hydrogen and municipal solid waste in the UEA.

In the US renewable fuels producer Raven and hydrogen aviation technologies firm H3 Dynamics said they will collaborate on waste-to-hydrogen energy systems. The new hydrogen production facilities could possibly be constructed at Raven's upcoming SAF plants as it has agreed with fellow renewable fuels firm Emerging Fuels Technology (EFT) to produce SAF.

Separately, Illinois state lawmakers have approved legislation to create a $1.50/USG SAF tax credit that airlines can use to satisfy all or part of their state use tax liabilities.

The legislation, which must be signed by governor JB Pritzker, will create a tax credit for every gallon of SAF sold to or used by an air carrier in Illinois from 1 June 2023 to 1 June 2033.

The Illinois SAF credit differs from SAF credits generated under California, Oregon, and Washington low carbon fuel standards (LCFS) in that it is given only to airlines operating in the state that buy the fuel — not to the producers of the fuel. The credit only applies for SAF used in domestic flights, since airlines do not pay taxes on jet fuel used for international flights.