SHELL PLC By Christian Moess Laursen and Michael Susin
Shell will pause the construction of its Rotterdam biofuels facility, one of Europe's largest, as it seeks to reign on project costs amid weak global demand for the fuel.
The British energy major said its Dutch subsidiary will conduct an impairment review of the Shell Energy and Chemicals Park project in the Netherlands and will provide further details in its second-quarter update, due to be published Friday.
The company said Tuesday that the pause will reduce the number of contractors on site and activity will slow, helping to control costs.
"Temporarily pausing on-site construction now will allow us to assess the most commercial way forward for the project," Shell downstream, renewables and energy solutions director Huibert Vigeveno said.
The call to halt construction comes as the European biofuels market has weakened significantly since the second half of last year. Profit margins have been squeezed by a large drop in the price of renewable fuel credits in the U.S.
Shares in biofuels market leader Neste have shed nearly half their value this year, with the Finnish company in May cutting its renewable-fuel margin forecast. Shell's rival BP similarly paused biofuels investment at U.S. and German oil refineries recently.
"[Shell's] decision is likely related to a weaker outlook for renewable diesel and sustainable aviation fuel profit margins," OPIS principal middle distillates reporter Jaime Llinares Taboada said.
OPIS is an energy-data and analytics provider part of Dow Jones, publisher of Dow Jones Newswires.
Biofuels are made from organic sources like plants, algae or animal waste, and are considered an efficient solution to reduce global emissions.
Shell Chief Executive Wael Sawan recently loosened the company's target for carbon-emission cuts from its operations in a push to increase investor returns.
Under Sawan--who became CEO in January last year--Shell has set a course to focus on its profitable oil-and-gas assets, pivoting from its prior energy-transition pledges.
Since then, the company has sold its stake in a wind-energy project and scrapped hydrogen projects in the U.S., divested European power-retail units and sold its Singaporean refining and petrochemical assets, while boosting its position in oil and liquefied natural-gas.
The Rotterdam facility was set to produce 820,000 metric tons of biofuels a year, including sustainable aviation fuel and renewable diesel made from waste such as cooking oil.
The facility could produce enough renewable diesel to avoid 2.8 million tons of carbon-dioxide emissions a year, the equivalent of taking at least 1 million cars off the roads, Shell said when it announced its final investment decision in 2021.
Shell said it remains committed to the target of achieving net-zero emissions by 2050, with low-carbon fuels being part of its strategy.
Write to Christian Moess Laursen at christian.moess@wsj.com and Michael Susin at michael.susin@wsj.com.
(END) Dow Jones Newswires
07-02-24 0824ET
