Sustainable Aviation Fuel Production: A Strategic Fit for Equinor? An exploratory case study of the Norwegian SAF production industry and production prospects at the Mongstad refinery

Abstract

With increasingly high levels of greenhouse gas emissions, the aviation industry is calling for technological innovation to align with the Net Zero Emissions by 2050 Scenario. Nowadays, sustainable aviation fuel (SAF) is widely recognised as having the greatest potential to curb the aviation industry’s CO2 emissions. However, despite this, SAF is characterised by limited global production volumes and represents only a small fraction of global aviation fuel demand. There are currently no operational SAF production facilities in Norway and its adoption within the domestic aviation sector remains extremely modest. This thesis thereby aims to analyse the macroeconomic environment surrounding SAF in Norway in order to assess whether Equinor should develop the production of SAF at the Mongstad refinery.

This thesis firstly explores the opportunities and barriers surrounding the SAF market in Norway by using the PESTEL framework. The analysis reveals that the Norwegian SAF industry is characterised by high market uncertainty due to the lack of regulatory frameworks and economic incentives to encourage the domestic production and usage of SAF. Norwegian producers are thereby found to be at a disadvantage compared to EU SAF producers who benefit from clear regulatory frameworks set out by EU energy mandates and initiatives. For this reason, the current high cost of producing SAF in a market characterised by uncertainty is a major barrier to the establishment of a domestic SAF production industry.

Drawing upon the analysis of the macroeconomic environment surrounding SAF in Norway, this thesis has used the SWOT framework to assess whether Equinor should develop the production of SAF at the Mongstad refinery. While this thesis highlights that Equinor has access to great infrastructure and assets that grant it a competitive advantage, it reveals that the company should hold off investing in a SAF production facility until greater technological maturity and domestic market predictability are achieved to mitigate investment risks in this high-risk industry. Once this is achieved, the thesis concludes that Equinor should invest in a Power-to-Liquid facility at the Mongstad refinery to develop the production of eSAF. This conclusion is based on key factors including feedstock availability, cost considerations, and potential market prospects specified in the analysis.