Shell has formally abandoned plans to complete an 820,000 t/year biofuels facility in Rotterdam. Originally approved in 2021 and expected to come online by 2025, the plant was designed to produce sustainable aviation fuel (SAF) and hydrotreated vegetable oil (HVO) from waste-based feedstocks. After halting construction in July 2024, Shell concluded that the project would not be competitive, citing high costs, weak market fundamentals, and the inability to deliver affordable low-carbon products. The company has already taken a write-down of up to $1 billion and continues to streamline its renewables portfolio, where most activities have been loss-making.
Market Dynamics Behind the Decision
The global SAF market remains oversupplied, with production capacity expanding faster than regulatory mandates. In the EU, blending obligations are fixed at 2% until 2030, meaning demand growth will not absorb the wave of new projects. SAF spot prices in northwest Europe averaged about $1,939/t in 2025, down from over $2,300/t a year earlier. At the same time, HVO has experienced firmer demand due to regulatory changes in biofuel credit (ticket) systems in the Netherlands and Germany, which reduced the flexibility for compliance carryovers and forced more immediate purchases. Protectionist measures also play a role: the EU imposed anti-dumping tariffs on Chinese, US, and Canadian HVO, reshaping trade flows and influencing European market prices.
Understanding the Fuels
SAF, often produced as HEFA-SPK (Hydroprocessed Esters and Fatty Acids – Synthetic Paraffinic Kerosene), is the aviation sector’s main pathway to decarbonisation, while HVO, also known as renewable diesel, is chemically similar to fossil diesel and usable in existing engines. Both rely heavily on waste oils such as used cooking oil. HVO typically requires fewer processing steps than SAF, making it cheaper to produce. Yet in 2025, HVO prices have exceeded SAF, reflecting stronger policy-driven demand.
Implications and Outlook
Shell’s withdrawal underscores a broader industry challenge: even as governments promote decarbonisation, policy frameworks and market signals remain insufficient to secure investment returns in capital-intensive biofuels projects. The case illustrates the tension between political ambitions, technological feasibility, and commercial viability. While Shell continues to invest in other low-carbon projects in the Netherlands — including the €1.3bn Porthos CCS system and the 200 MW Holland Hydrogen 1 electrolyser — the Rotterdam cancellation highlights the fragility of large-scale biofuels investments in a market constrained by modest mandates and volatile pricing. In the bigger picture, the decision shows that energy transition initiatives must balance environmental ambition with financial competitiveness to succeed.
