Cathay Pacific enters equity deal and 10-year offtake agreement with MSW-to-biojet developer Fulcrum
(photo: Cathay Pacific)
Tue 12 Aug 2014 – Cathay Pacific Airways has made a strategic equity investment in Fulcrum BioEnergy, a California-based developer of a municipal solid waste (MSW) to sustainable jet fuel process. The Hong Kong airline has also negotiated a long-term supply agreement with Fulcrum for an initial 375 million US gallons of biojet fuel over 10 years, representing around 2 per cent of the airline’s current annual fuel consumption. Fulcrum says it plans to commence construction of its first commercial plant later this year and to build large-scale jet fuel plants at multiple locations, including sites strategic to the Cathay Pacific network, primarily in North America. British Airways has already entered the MSW-to-biojet market in a similar partnership with Fulcrum rival Solena that aims to produce sustainable jet fuel from 2017 at a new plant east of London.
“We are pleased to have identified Fulcrum as a strategic business partner that has the necessary vision and technological know-how to help Cathay Pacific pursue the use of biojet fuels,” commented Cathay Pacific Chief Executive Ivan Chu. “These fuels are an important component of our sustainable development strategy, under which we aim to achieve carbon-neutral growth from 2020.”
Fulcrum claims to have successfully demonstrated its drop-in fuel process at a fully-integrated process demonstration facility located in Durham, North Carolina. The process utilises a steam-reforming gasification system manufactured and licensed by ThermoChem Recovery International and a Fischer-Tropsch gas-to-liquids technology licensed from Emerging Fuels Technology to convert MSW into synthetic paraffinic kerosene (SPK) jet fuel and diesel. Fulcrum says the jet fuel produced by the process will reduce lifecycle carbon emissions by more than 80% when compared to traditional fuels. The company also points out that methane emissions, a greenhouse gas 21 times more potent as a global warming contributor than CO2, are reduced as a result of reduced landfill from MSW.
“The feedstock will be pre-sorted to remove any recyclables prior to being processed into fuels,” said Cathay Pacific Biofuel Manager Jeff Ovens. “The company has proved that its technology is viable and has supply commitments in place for feedstock needed for the fuel production. These commitments will cover both near-term and future developments.”
Details of the investment have not been revealed by the two parties although there is an option in place for Cathay Pacific to take a further stake in the venture. Similarly, no value has been placed on the offtake agreement but at parity with current conventional jet kerosene prices, the 10-year supply of biojet fuel is worth over $1 billion. British Airways has committed to purchasing the jet fuel produced at the Solena GreenSky plant, around 16 million gallons a year, for the next 11 years at “market competitive” prices, currently worth around $550 million.
In May last year, the privately-held Fulcrum announced it had been awarded a $4.7 million grant by the US Department of Defense towards the engineering and development of its first MSW plant to produce jet fuel “at a lower cost to the military, and with lower carbon emissions than petroleum jet fuel.” The plant was to be situated at a location where Fulcrum had secured MSW under long-term, fixed, zero-cost feedstock contracts.
“Cathay Pacific shares our vision and plan to bring a whole new source of sustainable fuel to the airline industry. A new fuel that has exactly the same molecules as fossil fuel but is cleaner, lower in carbon, renewable and lower cost than traditional fossil fuels,” said Fulcrum CEO Jim Macias. “Cathay Pacific is really stepping up to accelerate deliveries of this fuel to the market. This relationship adds to Fulcrum’s existing feedstock, technology and fuel offtake partners that enhance Fulcrum’s low-cost business model for the production and sale of large volumes of low-carbon jet fuel.”