Shell abandons major biofuel plant in strategic shift

Wednesday 03 September 2025 - 16:20

By: Dakir Madiha

Shell abandons major biofuel plant in strategic shift

Shell has officially canceled plans to build one of Europe’s largest biofuel facilities in Rotterdam, marking a significant retreat from renewable fuels. The decision reflects challenging market conditions and a broader strategic pivot toward fossil fuel investments.

The British energy giant announced on September 2, 2025, that it would not resume construction of the 820,000-ton-per-year biofuel plant at the Shell Energy and Chemicals Park Rotterdam. The facility was intended to produce sustainable aviation fuel (SAF) and hydrotreated vegetable oil using waste-derived feedstocks. Initially scheduled to begin operations this year, the project was temporarily suspended in July 2024.

Market conditions prompt strategic reevaluation

“Following a thorough commercial and technical assessment to re-evaluate the project's competitiveness, Shell will no longer pursue it,” the company stated. Machteld de Haan, Shell's president of downstream, renewables, and energy solutions, explained that market dynamics and the costs of completion rendered the facility “insufficiently competitive to meet customer needs for affordable, low-carbon products.”

This decision comes despite the European Union's ReFuelEU Aviation mandate, which requires airports in the EU to use at least 2% SAF by 2025, increasing to 6% by 2030 and 20% by 2035. However, structural challenges in the biofuel market persist, with SAF prices remaining lower than in recent years. Industry analysts predict a global oversupply until regulatory obligations significantly increase demand in the 2030s.

Shell has already reported an impairment charge of $600 million to $1 billion related to the Rotterdam project. The facility would have been among Europe’s largest biofuel plants, second only to Neste’s 1.4 million-ton-per-year plant, also located in Rotterdam.

Broader industry retreat

Shell’s decision mirrors broader challenges faced by the advanced biofuel sector. According to Argus Media, the company has “streamlined its renewables production portfolio,” with most of its renewable energy operations incurring losses by the second quarter of 2025. Competitors like BP have similarly scaled back investments in biofuels, suspending projects in Germany and the United States.

This shift comes as global oil demand has surged to record levels, surpassing 102 million barrels per day in 2023, compared to approximately 100.5 million in 2019. Conservative forecasts suggest annual records will continue to be set, with demand exceeding 105 million barrels per day by 2029.

Strategic pivot to fossil fuels

Shell’s abandonment of the Rotterdam plant aligns with its broader strategic realignment. In March 2024, the company dropped its 2035 emissions reduction target and softened its 2030 carbon intensity goal from 20% to a range of 15-20%. The company has emphasized liquefied natural gas (LNG) as a priority, aiming to grow its LNG business by 20-30% by 2030.

Despite this retreat, Shell maintains its position as a leading global trader and supplier of biofuels, including SAF, trading over 10 billion liters of low-carbon fuels in 2024. However, the Rotterdam project’s cancellation highlights the commercial hurdles facing renewable fuel initiatives, even as regulations aim to boost demand.

The Netherlands remains a central hub for Shell’s energy transition efforts, with €6.5 billion invested in projects such as the Porthos carbon capture and storage initiative and the Holland Hydrogen 1 renewable hydrogen development.