Refiner Varo bets on green jet fuel with $600 million Dutch site

European refiner Varo Energy plans to invest $600 million to build a sustainable jet fuel plant in the Netherlands as it continues to expand its biofuels business.

The company, owned by trader Vitol Group and private equity firm Carlyle Group Inc., will wholly own the facility that will be able produce 245,000 tons of the green fuel a year. The project is part of Varo’s $3.5 billion strategy to cut emissions.

While hydrogen has been touted as the future for long-haul trucks and electric vehicles to replace the internal combustion engine, the air industry has so far proved trickier to decarbonize. Sustainable aviation fuel is currently the only feasible alternative to traditional jet fuel, but can cost as much as five times more.

The Swiss firm will re-purpose existing infrastructure at Gunvor Group Ltd.’s Rotterdam site, with first production slated for the fourth quarter of 2026. That will help speed up construction, and a final investment decision is expected soon.

“Rotterdam is a neighborhood that has great demand for SAF,” Varo Chief Executive Officer Dev Sanyal said in an interview from the city on Wednesday. 

The plant plant will have feedstock capacity of 350,000 tons annually, and will also produce a mixture of bio-naphtha and bio-propane, in addition to SAF. The plan is part of the company’s long-term target of reaching 500,000 tons of biofuel capacity.

Demand for green jet fuel is growing fast in the European Union, where new regulations will require airlines to fill planes with a 2% SAF blend by 2025, rising to 70% by 2050. Production from Varo’s facility will deliver as much as 7% of the bloc’s 2030 SAF target, the refiner said.

Varo earlier this year signed a preliminary agreement with German airline Deutsche Lufthansa AG to begin supplying volumes of SAF as early as 2026. Sanyal didn’t say if the refiner is in talks with other airlines for similar deals, but the EU’s mandate means that demand is only going to increase.

“If the sector is going to decarbonize, it’s through SAF, so of course we’re going to want to provide this to a number of different customers,” he said.