In the latest setback for low-carbon energy projects, Shell has announced that it will pause construction work on one of Europe’s largest biofuel plants in the Netherlands due to weak market conditions.
The 820,000-ton-per-year biofuels facility, which was originally slated to begin production in 2025, is now expected to start up towards the end of the decade. Shell cited softening demand for biofuels in Europe, including after Sweden cut a biofuel mandate, as well as rising supplies in the U.S. as the reasons for the delay.
The decision to pause the project comes as Shell’s new CEO, Wael Sawan, is focused on boosting returns by scrapping, selling, or scaling back various renewable and hydrogen initiatives in order to concentrate the company’s efforts on its core oil and gas operations.
Rival BP also recently announced it was pausing two of its own biofuel projects in Germany and the U.S., underscoring the challenges facing the low-carbon fuels market.
Shell said the pause in construction would allow it to “assess the most commercial way forward for the project,” while emphasizing that low-carbon fuels remain a key part of the company’s strategy to achieve net-zero emissions by 2050.
However, analysts note that the setback further highlights the difficulties oil majors have faced in navigating the advanced biofuels space, which has been impacted by factors such as shifting government policies and evolving market dynamics.
Despite the pause, Shell’s shares were up 1.3% on the news, as investors appeared to view the decision as consistent with the company’s renewed focus on profitability under its new leadership.