BP lobbies for green fuel mandates across Aussie airlines

Australian Financial Review

Energy major BP is lobbying the Albanese government to impose green fuel mandates on Qantas and other domestic carriers to decarbonise air travel.

BP wants hard targets for the use of sustainable aviation fuel as it weighs up a $1 billion-plus investment in converting an oil import terminal in Western Australia to a renewable fuel production hub.

BP Australia boss Frederic Baudry said the safeguard mechanism – the Albanese government’s flagship emissions reduction policy for heavy industry – should be sector-specific and in transport promote investment in a renewable fuels industry.

Mr Baudry said airlines and other entities covered by the safeguard mechanism would need to switch to lower carbon fuels once they had exhausted their means of reducing emissions through “low-hanging fruit” such as offsets and fleet renewal.

He said BP was generally happy with the government’s policy settings around energy transition, but renewable fuels were a “missing piece”.

“There is no legislation whatsoever around renewable fuels,” he said.

“We think the market for offsets, for example, is going to be finite. We think the penalty regime [under the safeguard mechanism] may need to be adjusted over time and clearly the missing piece for us is renewable fuels.

“Before new technologies can really take care of decarbonisation of transport, renewable fuels are an essential piece of the puzzle.

“Sector targets and measures that will encourage investment in a home-grown renewable fuels industry today will ensure facilities like the Kwinana Energy Hub [the plant earmarked for WA] are online when the hard-to-abate industries need them, and in doing so, will avoid the longer-term prospect of Australia becoming an import market only.”

Qantas has also called for a green fuel mandate to help kickstart local production of sustainable aviation fuel (SAF).

Qantas noted in May that the UK, Europe and Japan had set or proposed mandates for 2030. In the case of Japan, those mandates will apply to flights from Australia.

The BP push for mandated targets for airlines comes as GrainCorp prepares to spend several million dollars on a major oilseed crushing plant in WA and fields partnership interest from oil and gas majors.

BP is walking the energy transition tightrope in the state that is a major LNG producer as well as a big exporter of canola crops converted into biofuel in Europe.

In addition to the potential billion-dollar plunge into renewable fuel production at Kwinana, it is pushing ahead with one of the biggest renewable energy projects in the world on the coast between Broome and Port Hedland.

BP has also secured 90,000 hectares of mainly farmland further south as part of plans to supply renewable energy for critical mineral processing, green iron/steel projects and the households and business in the southern half of the state.

Meanwhile, it has a 44 per cent stake in the $30 billion Browse offshore project led by Woodside and also backed by PetroChina and Japanese heavyweights Mitsubishi and Mitsui.

Mr Baudry said other nations were counting on WA for LNG and indicated the Browse approvals process was now riding on carbon capture and storage.

“We’re working through all the approval processes at the moment. It’s very clear to us that the future of gas and gas exploration has to have a very strong CCS component,” he said.

BP’s Kwinana plant is slated to produce 10,000 barrels a day of SAF or renewable diesel with a final investment decision expected in 2024.

It is one of five global biofuels projects under consideration by BP, one of the world’s biggest suppliers of aviation fuel at about 25 billion litres a year.

Mr Baudry said that as head of the multinational’s business in Australia, he was in a race for biofuels capital with other jurisdictions.

“I’m competing with other similar facilities in Europe where SAF has been legislated and other such facilities in the US where there is now a low-carbon fuel standard,” he said.

BP concedes that mandating SAF use would increase the cost of air travel in Australia because it is more expensive than JET A-1 fuel used in aviation.

However, BP estimates that if SAF made up 10 per cent of the fuel load, it would add only about $30 to the cost of a flight from Brisbane to Perth.

The first trans-Atlantic flight using 100 per cent SAF was completed in November under a partnership between Virgin, Rolls Royce and BP.