Oceania Biofuels pulls $500m Gladstone project as another bubble bursts

Oceania Biofuels has quietly pulled its $500 million Queensland biofuels project out of the federal approval process, just two years after it was launched with a big splash by the state government. 

The company withdrew the project from the Environment Protection and Biodiversity Conservation (EPBC) process on Friday. 

Its website has been taken down and the former CEO now lists himself as ‘principal’ on LinkedIn and CEO of a Northern Territory waste and recycling business. 

Construction was supposed to start in 2023 and the biorefinery was supposed to be running in 2025, using waste tallow, canola and used cooking oil to produce 350 million litres of renewable diesel and sustainable aviation fuel a year. 

The Google Maps of the address 42 Guerassimoff Road in Yarwun, shows just a bare site, denuded of vegetation. 

The company chose the Yarwun Industrial Precinct in Gladstone in northern Queensland, which also hosts the state’s LNG export port and Northern Oil’s waste-lube-to-base-lube recycling facility, as the project’s future home. 

As well as a refinery, the plan was to build 18 storage tanks, office buildings and warehouses, and employ 60 people. 

Another bubble bursts

Renew Economy is seeking comment from the key people behind the project, but the trends aren’t looking good for the industry they’re trying to break into. 

At the end of May, US biofuels company Fulcrum Bioenergy let nearly all of its staff go and closed its $200 million Nevada plant, despite raising more than $1 billion from the likes of BP, United Airlines, Cathay Pacific and Japan Airlines. 

Over the weekend Shell cancelled its proposed HySkies renewable hydrogen sustainable aviation fuel project in Sweden, and had earlier stopped construction on what was supposed to be the biggest biofuel plant in Europe in the Netherlands. It will wear a $1 billion write down for that move. 

Investors are fleeing the sector, as graphically illustrated by the share price of Finnish biofuels pioneer Neste, which have been heading downwards since a peak in 2021. 

The biofuel bubble is not unlike the 2020-21 electrolyser hype that foresaw epic demand growth that could never materialise in the short time companies were given to achieve. That industry must now survive until optimistic demand forecasts actually appear.

Similarly, COVID-era excitement combined with surging fossil fuel prices during the start of the Ukraine war inspired a similar bubble for biofuels. 

Bloomberg analyst Javier Blas wrote last week that a surge in the number of biofuel factories, particularly in China, led to an equal wave of product, which caused a price slump. Combined with cost overruns for building out complex factories and engineering difficulties, and margins for biofuels — especially new ventures that require huge upfront investments — are badly depressed.

Et tu, Australia?

Australia has already gone through one biofuels crash, in 2016 due to a combination of removing an excise tax exemption and freefalling petrol prices. 

Today, it’s hardly a competitive arena, even though there is allegedly demand locally for renewable diesel.  

Last month, oil and gas developer Carnarvon quit its loudly spruiked renewable diesel refinery in Narrogin, to focus on developing its Dorado oil fields off the coast of northern Western Australia. 

This is despite receiving a $2 million Clean Energy Future Fund grant from the WA government to set up the plant. 

BP won Western Australia state planning approval late in 2023 to turn its former Kwinana refining site into a biofuels refinery. It said in February the site will be producing sustainable biofuels by 2026. 

And Australian company Jet Zero secured investment in April from Japan’s Idemitsu Kosan for a $600 million project in Townsville. It has a supply agreement with LanzaJet and the support of Airbus and Qantas which invested in 2023.