In focus Pernis HEFA plant and tax

Shell is building a facility at its Pernis Energy and Chemicals Park in the Netherlands which will process feedstocks, such as vegetable oils, animal fats and waste oils, into renewable diesel for use in vehicles and sustainable aviation fuel for use in aircraft. The process is known as HEFA (Hydroprocessed esters and fatty acids) and the Rotterdam biofuels facility is expected to start production in 2024.

A secure supply of feedstocks is essential. Feedstocks will be sourced through offtake contracts with suppliers, equity investments and partnerships with third parties that have access to these materials. Factors such as availability, performance, regulatory constraints and sustainability will need to be considered.

Tax considerations will include: the structuring of equity feedstock investments; the financing and depreciation of the assets; and the transfer pricing of the new types of feedstock or product between different legal entities in the Group.

In addition, there are indirect tax issues to consider in terms of new transactions and movements arising from currently immature supply chains. We will need to ensure that these are correctly reflected in the relevant systems and processes. For example, in some cases businesses other than those using the fuel are prepared to fund any premium cost of a lower-carbon alternative as part of their contribution to decarbonising the sector. These new commercial realities must also be analysed and addressed from a tax perspective.

We expect to capture carbon emissions from the HEFA manufacturing process and store them in an empty gas field beneath the North Sea through the planned Port of Rotterdam CO₂ Transport Hub and Offshore Storage project (PORTHOS).