(Bloomberg) -- Indian Oil Corp. is planning to build a 10 billion rupee ($122 million) sustainable aviation fuel plant as global supplies run significantly short of what's needed by airlines to meet decarbonization goals.
The facility will have capacity to produce 88,000 tons of SAF a year and Indian Oil is seeking to partner with other oil companies on the project, said S.S.V. Ramakumar, director for research and development. Supply agreements with airlines are needed to push ahead with the investment, he added.
The International Civil Aviation Organization last year adopted a target to cut emissions to net zero by 2050, and SAF has long been seen as the industry's fastest way to reduce emissions. However, global output is currently only a fraction of what's needed and airlines are banking on a huge supply boost.
“This is going to be a booming business,” Ramakumar said in an interview. “The reason for us to conceive such a big plant is that unless the capacity is higher, you won't get the economies of scale.”
The plant, which will be built at Indian Oil's Panipat refinery north of New Delhi and utilize alcohol-to-jet technology developed by LanzaJet, is likely to be the nation's first SAF facility should it be constructed. Rival Mangalore Refinery and Petrochemicals Ltd. has proposed another plant using different technology.
Tax incentives will also be needed for Indian Oil to push ahead with the investment in the plant, Ramakumar said, without elaborating. He added that there was an opportunity to export the fuel to Southeast Asia and Africa.
The next step will be a government recommendation to blend SAF with jet fuel, which will be key to airlines signing supply agreements with Indian Oil. An oil ministry panel, which Ramakumar leads, recommended an initial blending of 1% SAF into regular fuel from 2026 followed by a gradual ramp up, he said.
Airlines will also need tax breaks from the government or carbon credits to make it viable to use SAF due to the tight cost of operations, he said.
Global aviation accounts for more than 2% of the gases warming the planet, and other alternatives to curb emissions are lacking. Battery-powered aircraft don't have sufficient range for medium- and long-haul flights, and hydrogen will likely take many years to be a suitable option.
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