Volatile oil prices, growing environmental awareness and the need to reduce greenhouse gas emissions are driving a rapidly emerging market: synthetic fuels. The global market for synthetic e-fuels made by combining hydrogen and carbon dioxide into a liquid fuel is currently small at just $34 million in 2022 according to Transparency Market Research, but is forecast to balloon to over $28 billion by 2031 according to an annual growth rate of 64%. Synthetic fuels are highly versatile, subject to different density specifications and utilizable in all forms of transportation.
Significant opportunities especially exist in the growing demand for sustainable aviation fuels and fuel for heavy shipping. But the costs of producing synthetic fuel infrastructure still needs to fall. Technological complexities and limitations in infrastructure, including for clean hydrogen production and CO2 capture and transport, pose challenges for the widespread adoption of synthetic fuels.
Jeffrey Beyer recently spoke on Asharq Business about the current state of the synthetic fuels market, and the need to innovate to reduce the costs and emissions associated especially with the shipping and aviation sectors. Currently, the per-unit costs of synthetic fuels remain considerably higher than those of sustainable fuels.
Saudi Arabia, owning Aramco — the world's largest oil company — is starting to develop synthetic fuels by announcing its plan to operate two demonstration plants by 2025.
Once the Kingdom has produced test quantities of synthetic gasoline and jet fuel, it seeks to find regular buyers. Ahmad Al Khowaiter, Saudi Aramco's head of technology and innovation, agrees that "synthetic fuels can play an important role to accelerate the decarbonization of the global vehicle fleet".
If buyers accept the fuels, Aramco could build synthetic fuels refineries at the commercial scale. The company recently signed a joint
development agreement with Enowa, the energy and water subsidiary of NEOM — the master-planned urban area planned in Saudi Arabia's northwestern Tabuk province. The NEOM project's overall estimated cost exceeds $500 billion, including an ambitious linear city planned entirely by renewable energy sources.
Aramco plans to build a test plant for synthetic gasoline within NEOM's planned sustainble city gigaproject in northwest Saudi Arabia. The company will produce the synthetic gasoline by combining methanol extracted from green hydrogen with carbon dioxide and then converting that into road fuel. The test facility will produce 35 barrels a day of gasoline that creates 70% fewer emissions than current fuels, and a commercial scale refinery could produce 35,000 barrels, according to Al Khowaiter.
On an uncertain timeline, Aramco also plans to develop a synthetic jet fuel facility in collaboration with Repsol SA of Spain. Government support is needed for these technologies to become commercially viable, cost effective and implementable on a large scale.
Currently, as one of the world's largest oil producers and refiners, Aramco still plans to double its gross refining capacity, far dwarfing the renewable capacity added by its planned synthetic fuels projects.
As a crucial part of the transition pathway towards net-zero emissions in crucial sectors including maritime shipping and aviation, synthetic fuels must become economically viable at a large scale. The market is thus ready for innovation to bring down costs and instill sustainability at the core of Saudi Arabia's future vision.