Interview with Latvijas Avīze.

The world’s largest full-service aircraft leasing provider, Avia Solutions Group, together with its Latvian partners, has announced the start of preparatory work by the joint venture LSEZ NorSAF, SIA, for the construction of a sustainable aviation fuel (SAF and eSAF) plant in the Liepaja Special Economic Zone.

SAF is being called the future of aviation because it produces significantly fewer greenhouse gas emissions than conventional jet fuel. As of the beginning of this year, the European Union has introduced a requirement that at least 2% of all fuel consumed at airports must be SAF. Furthermore, this requirement will gradually increase, reaching 6% SAF in 2030 , of which 1.2% must be eSAF. The requirements will continue to grow to 20% SAF from 5% eSAF in 2035, but by 2050 the amount of SAF must already reach 70%, of which eSAF – 35%.

Production with a capacity of approximately 100,000 tons of SAF, 12,000 tons of diesel fuel and 8,000 tons of gasoline per year in Liepaja is planned to begin in 2030. The necessary investments are currently estimated at 650 million euros. If the project is implemented, the LSEZ NorSAF plant will become the largest SAF and eSAF production plant in Northern Europe. About this project, Latvia’s place and opportunities in the future global economy – in a conversation with Janis Kisiels, member of the board of LSEZ NorSAF.

What made you think that Latvia is a suitable place for SAF production?

 J. Kisiels: It would be difficult to define it, but we ourselves and our partners still see that Latvia has its place and future in the future economy. The fastest growing economy in our region is Poland . Our location is relatively well-connected to the rest of the world, especially ports – all Polish port areas are currently fully occupied, no additional capacity can be developed there. To a large extent, of course, this is related to the events in Ukraine, but in general, Polish ports already traditionally serve the Czech Republic, Slovakia and other Eastern European countries.

Since Poland is not available, opportunities also open up for other ports of the Baltic Sea countries, including Latvia. For example, in the port of Liepaja, by properly using the existing infrastructure and balancing the raw materials necessary for production, we can successfully compete not only in the production of aviation fuel, but also in the production of e-methanol, green ammonia and other components of the Green Economy. This is also our opportunity to fill the empty port capacities that have arisen as a result of the sanctions imposed on Russia and Belarus.

Avia Solutions Group founder and largest co-owner is from Lithuania. Why is Liepaja preferred over Klaipeda?

 Klaipeda is the only port in Lithuania, and there is no more free capacity there either. In addition, we are neighbors, it is about 100 kilometers from Liepaja to Klaipeda. We also have purely practical advantages.

One of the most important prerequisites for SAF production is electrical capacity. In Latvia, we have inherited relatively strong electrical networks from Soviet times – especially in the direction of Liepaja, where the so-called Kurzeme loop runs. One of the largest connections was at the former Liepājas Metalurgs. Therefore, we are still a region where various types of production can be developed very successfully.

However, Latvia is not particularly attractive with its energy prices.

 In our case, the rules are that the production of synthetic fuel must be carried out using renewable energy – from wind or sun. Any eSAF or e-fuel using green hydrogen will require new solar and wind parks. Our project will also need this, and in this way we will not create an electricity deficit in either the city or the region. As part of the project, we are planning completely separate electricity capacities that would only meet the needs of our factory. The total required connection capacity will be 200 MWh.

Cooperation with project developers from Lithuania – a lucky coincidence or purposeful work?

 I would say that it is a natural process. Our oil and chemical products storage and transshipment terminal was established in 2016. We have been in this business for a long time, and we can offer several significant advantages – a good location, sufficiently developed infrastructure and territory for the development of a production facility of this size. We have already established successful cooperation with our Lithuanian colleagues in other projects, which we decided to continue. Therefore, it would probably not be correct to talk about a happy coincidence.

What will the factory bring to Liepaja, to the region?

 By 2030, the factory will need at least 200 highly qualified and well-paid employees. This means that they will soon have to start training in cooperation with Riga Technical University. During the construction period of the factory, construction services will be required. We want to hire local entrepreneurs, who will also create new jobs at least for the construction period. Taking into account the ambitious goals, not only will a wide ecosystem and prerequisites be formed in the LSEZ territory, but there will also be a need to create other companies, as raw material logistics, storage, pre-processing and many other services will have to be ensured, which means that even 200-400 more jobs could be provided. EU regulations strictly stipulate that SAF must be produced only from waste from economic activities, for example, used vegetable oils, animal fats, etc., as well as agricultural and forestry biomass waste.

There are also technologies for producing SAF that can use bioethanol, other circular economy raw materials that come from agriculture or, for example, the forestry industry. The main principle is to recycle waste. Other raw materials are for the so-called e-fuel or e-SAF, which is produced from carbon dioxide hydrogen and using only renewable electricity. NorSAF will produce both SAF and eSAF.

Starting from 2030, we will need a lot of bioethanol and electricity, so we expect that up to 200 million euros of investments will be made in parallel through wind and solar power. We plan to obtain 100% of all raw materials for our needs in the Baltics from 2033 to 2035, involving farmers and forest industry workers, who now mainly export their by-products. In general, the total investments in the ecosystem around the SAF production plant could reach around two billion euros, which would also increase the gross domestic product of all of Latvia.

If the Green Deal starts to “wobble”, what will you do then?

 However, I am confident that there will be no “wobble”, and we have received these assurances during meetings with representatives of the European Commission – the Green Deal is not changing, the regulations remain. Including those related to the decarbonization of aviation. Airplanes generate 2% of total global emissions, the aviation industry as a whole – 4%. Regulators want manufacturers to decarbonize the airplanes themselves, but this is not a problem that can be solved quickly, taking into account flight safety and other aspects. Hydrogen fuel or airplanes with batteries are also not a solution in the near future. What is left? Only changes in the composition of the fuel, producing it as “ green ” as possible. Consequently, the SAF course is also determined and supported by airplane manufacturers.

300 factories are planned for 2030 worldwide. Including those that produce e-SAF. As far as I know, ten SAF factories have already been built in China, three are planned in Japan, and this process is also in an active stage in Malaysia, Turkey and many other countries. Because the reality is that there is currently no other way to decarbonize the aviation sector.

How much is 100,000 tons, even in the Baltic context?

 If we talk about fuel in general, it would not be much. Baltic airports consume about 400,000 tons of aviation fuel per year. However, it should be understood that SAF is only a small percentage, but a mandatory admixture. The European mandate shows that, starting from 2030, the EU will need a total of 2 million 760 thousand tons of SAF, of which 552,000 tons should be e-SAF and 2 million 208,000 tons – SAF. It is planned that we will produce both in Liepaja, but in the EU context it will be a relatively small part. We will be able to provide for the Baltics and it is already clear that about 90% of the production will be exported.

Under the current EU 2% mandate, only around 8,000 tonnes of SAF are needed for the domestic market. It is currently purchased mainly from Finland and the Netherlands.

The investments mentioned for the establishment of the factory could reach up to 650 million euros. Where from?

Innovative projects are undoubtedly expensive and complex. The successful implementation of such a project requires the involvement of not only its owners and developers, but also support from regional governments. Since we are an EU member state, we also need support from the European Commission, which is closely monitoring the development of SAF plant projects.

There must also be complete confidence in the availability of raw materials and guaranteed sales of the finished product. We are moving towards this step by step in a planned manner. LSEZ NorSAF is closely cooperating with potential suppliers, partners, investors and EU institutions in order to start the construction of the SAF plant as early as 2028. Financing is planned to be attracted from the project owners, several institutional investors, such as the EU Innovation Fund. Several international commercial banks have also shown interest in participating in the project.

By correctly forecasting and balancing planned costs with revenues, we can also become a platform for the development of other sustainable fuel production plants. At the same time, the country would obtain profitable and sustainable fuel, promoting the development of its national economy and ensuring energy independence. This is very important in today’s geopolitical instability. The project will also open up profitable cooperation opportunities for local solar, wind and biomass energy producing companies.

How far along is the project now?

This year we plan to complete the study. It is planned that the final financial investment decision will be made by the owners in 2027. After that, construction is planned to begin in about six months. In parallel, we have already started the environmental impact assessment procedure. We have also achieved that this project has been granted the status of a green corridor. We are doing everything possible to ensure that the SAF plant in Liepāja can start operating in 2030.

Does the Latvian government understand the potential of such a project?

 We are starting to feel it. Both the Ministry of Economy, the Ministry of Economy and Transport, and the government understand that SAF production would also develop other manufacturing sectors and the provision of services in Latvia as a whole. I think we have also found the right project supporters in the European Commission. In order to implement a project of this scale, all its components and nuances must coincide, and political support is also necessary.

“We are working closely with potential suppliers, partners, investors and EU institutions to start construction of a sustainable aviation fuel plant in the LSEZ in 2028 and have it operational in 2030,” says Janis Kisiels, member of the board of LSEZ NorSAF, SIA.