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Press Release

Ørsted Scraps Flagship One Green Shipping Fuels Project in Sweden

Published by Todd Bush on August 16, 2024

Ørsted Cancels Swedish E-Methanol Plant Amid Strategic Business Shift

Ørsted has scrapped plans for a major green fuels plant in Sweden, citing slower-than-expected growth in the emerging market for low-carbon e-fuels in Europe.

Posting its latest financial results yesterday, the company said it had racked up 3.2 billion Danish Krone (£370m) in impairment losses over the first half of this year, driven largely by decisions to cancel its Flagship One e-methanol production project in Sweden and ongoing delays to its Revolution Wind offshore wind scheme on the East Coast of the US.

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The decision comes just two years after the company announced it had made a final investment decision in Flagship One, which aimed to use captured biogenic CO2 and renewable hydrogen to produce 55,000 tonnes of e-methanol for the shipping industry.

Carbon Clean, a British company, was contracted to provide the carbon capture services for the scheme, which was to be situated in northern Sweden.

Inflationary Pressures and Strategic Review

Offshore wind developers worldwide have been grappling with inflationary pressures over the past two years, driven by supply chain disruptions and rising costs in the wake of the energy crisis.

Ørsted, which last year cancelled two high-profile wind projects in the US, announced a strategic review of its business in February, reducing its investment and capacity targets and pausing dividend payments.

Mads Nipper, Ørsted's CEO, said the company was now focused on "prioritizing growth options with the highest potential for value creation."

"The liquid e-fuel market in Europe is developing slower than expected, and we have taken the strategic decision to de-prioritize our efforts within the market and cease the development of Flagship One," he said. "We will continue our focus and development efforts within renewable hydrogen, which is essential for decarbonizing key industries in Europe and closer to our core business."

Impact on Ørsted’s Financial Performance

The decision comes a few months after fossil fuel giant Shell paused the construction of a major biofuels plant in Rotterdam that would have produced so-called sustainable aviation fuel (SAF) designed to help decarbonize flight.

Despite the cancellation of the e-fuels project, however, Nipper said he was "pleased" with Ørsted's half-year financial results overall, which show the company's operating profits rose to 14.1 billion Krone (£1bn) in the first half of this year, up from 10.2 billion Krone (£735m) for the same period last year.

"Ørsted's operations are performing well, and particularly the earnings from our offshore wind farms, and thus our core business, have increased," he said. "Therefore, we maintain our EBITDA guidance for the full year, and we increase our earnings expectations for our offshore wind business."

However, he described the decision to push the commercial operation date for Revolution Wind from 2025 to 2026 following construction delays to an onshore substation as "disappointing."

"In the first half of the year, we have executed on the updated business plan that we presented in February, and we have put almost 2GW of renewable energy capacity into operation, providing renewable energy to more than 1.5 million households across three continents," Nipper said. "This is a significant contribution to Ørsted's long-term renewable capacity goals.

"Despite encouraging progress on our US offshore wind project Revolution Wind, the construction of the onshore substation for the project has been delayed. This means that we have pushed the commercial operation date from 2025 into 2026, which led to an impairment. This is, of course, unsatisfactory, and we continue our dedicated efforts to de-risk our portfolio."

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