By Yuka Obayashi
TOKYO (Reuters) – Cosmo Energy Holdings is set to launch Japan’s first domestic production of sustainable aviation fuel in April, a step toward the country’s goal of replacing 10% of jet fuel with a cleaner alternative, though cost-cutting challenges remain.
Cosmo, the nation’s third-largest refiner, will produce SAF from used cooking oil at its Sakai refinery in western Japan.
“Our goal is to boost SAF supply to 300,000 kilolitres by 2030 through domestic production and imports,” Takeshi Takada, general manager of new business development, said.
Japanese refiners must supply SAF equivalent to 10% of their aviation fuel sales by 2030, as Japan works to combat climate change and aligns with global efforts to cut carbon dioxide (CO2) emissions from airplanes.
A company official said 300,000 kl (1.89 million barrels) would be sufficient to meet 10% of Cosmo’s jet sales.
Cosmo plans to produce 30,000 kl of SAF annually at Sakai, supply 150,000 kl from its Sakaide site in western Japan using bioethanol and import 120,000 kl from Thailand’s Bangchak and other Asian suppliers, Takada said.
The refiner aims to build expertise and customer relationships by launching production and sales ahead of competitors, despite challenges in reducing costs, securing raw materials and locking in buyers, he said.
The Sakai project, targeting production of 24,000 kl in fiscal 2025 after accounting for site maintenance, has already secured most customers, including Japan Airlines (JAL), ANA and DHL.
Cosmo’s next goal is to start SAF production at Sakaide by around 2029, with a final investment decision expected in fiscal 2026. Both projects have secured government subsidies, covering about half of capital expenditures.
Cosmo declined to disclose Sakai’s production costs or SAF prices, but the company expects to turn a profit with the help of subsidies. SAF is estimated to cost three to five times more than conventional jet fuel.
While higher production volume could lower distribution costs, significant cost reductions are unlikely due to raw material constraints, which make up a large portion of expenses, Takada said.
“Japan’s subsidy scheme is at a medium level by global standards … Countries will compete to offer attractive subsidy schemes for SAF deployment to maintain hub airport status,” Takada said.
Recently, the Sakaide plant and three other projects secured part of 340 billion yen ($2.3 billion) in government subsidies over five years to support local SAF production.
The projects include Eneos’ 400,000 kl facility in Wakayama, Idemitsu Kosan’s 250,000 kl plant in Yamaguchi and Taiyo Oil’s 200,000 kl project in Okinawa, all still in the design phase.
Idemitsu has also secured a separate subsidy for a 100,000 kl project in its Chiba refinery near Tokyo.
These projects are key to boosting domestic production and meeting Japan’s estimated SAF demand of 1.7 million kl by 2030.
($1 = 147.5700 yen)
(Reporting by Yuka Obayashi; Editing by Jacqueline Wong)
