TotalEnergies' SAF Ambitions: A Strategic Leap in the Race to Net Zero?

The aviation sector's race to decarbonize has thrust Sustainable Aviation Fuel (SAF) into the spotlight, and TotalEnergies is positioning itself as a frontrunner. With a target of producing 500,000 tons of SAF annually by 2028—expanding to 1.5 million tons by 2030—the French energy giant is betting big on this nascent market. But how does this strategy align with broader industry trends, and what does it mean for investors in the energy transition?

Strategic Moves: Infrastructure, Partnerships, and Scale

TotalEnergies' ambition is underpinned by a multi-pronged approach. In France, its Grandpuits refinery—retooled as a zero-crude platform—will produce 285,000 tons of SAF by 2027 using circular feedstocks like used cooking oil and animal fat. Meanwhile, the Gonfreville refinery is ramping up output to 40,000 tons by 2025, with an additional 150,000 tons possible once coprocessing of hydro-treated vegetable oil (HVO) is approved by ASTM. At La Mède, a €340 million biorefinery is enabling biodiesel production for SAF, with plans to process 100% waste feedstock by 2024.

These investments reflect a deliberate shift away from fossil fuels. By 2028, these three sites alone could account for nearly 500,000 tons of annual SAF capacity—a direct hit on its target. But TotalEnergies isn't stopping there. The company aims to capture 10% of the global SAF market by 2030, expanding into the U.S., Japan, and South Korea.

The Airbus Partnership: Securing Demand and Innovation

A key pillar of TotalEnergies' strategy is its partnership with Airbus, announced in February 2024. The collaboration ensures TotalEnergies will supply SAF for over half of Airbus's European aircraft needs while jointly developing fuels tailored to next-gen planes. This alliance not only secures demand but also accelerates R&D into 100% SAF blends—a critical step toward meeting aviation's net-zero goals by 2050.

The partnership also addresses non-CO2 impacts, such as contrails, which TotalEnergies is studying in tandem with Airbus. Such innovation underscores how the company is moving beyond incremental changes to tackle systemic challenges in aviation's decarbonization.

Market Context: Regulatory Tailwinds and Industry Demand

The EU's ReFuelEU mandate is a tailwind for TotalEnergies. Requiring 2% SAF blending by 2025, escalating to 70% by 2050, it creates a regulatory framework that aligns with the company's targets. Airlines, too, are pushing for SAF: Delta, Lufthansa, and Air France have all inked long-term supply deals with producers.

Yet SAF's cost remains a hurdle. Today, SAF is 2–3x more expensive than conventional jet fuel. However, as production scales and feedstock costs stabilize—thanks to waste-based inputs—economies of scale could drive down prices. TotalEnergies' focus on circular feedstocks positions it to mitigate this risk better than competitors reliant on crop-based oils, which face sustainability and cost concerns.

Risks and Challenges

Despite its momentum, TotalEnergies faces hurdles. Feedstock supply constraints could limit growth if waste oils become scarce or expensive. The company's reliance on coprocessing—still pending ASTM approval—adds regulatory uncertainty. Competitors like Neste and bp are also scaling up SAF production, intensifying market competition.

Furthermore, while the EU's mandates are a boon, geopolitical risks loom. The U.S. Inflation Reduction Act offers tax credits for SAF, but global policy fragmentation could complicate cross-border expansion.

Investment Implications: A Play on the Energy Transition?

For investors, TotalEnergies' SAF push offers a compelling thesis. Its vertically integrated model—from feedstock sourcing to production—reduces supply chain risks, while partnerships like Airbus's lock in demand. The stock's performance reflects this optimism:

However, investors should monitor feedstock availability and regulatory approvals closely. A sustained rise in SAF demand, driven by airline commitments and policy, could propel the stock further.

Conclusion: A Strategic Bet, but Not Without Hurdles

TotalEnergies' SAF strategy is a bold move to capitalize on aviation's decarbonization imperative. Its infrastructure investments, strategic alliances, and focus on circular feedstocks position it as a leader in a market poised for growth. For energy investors, the stock presents an opportunity to bet on the transition—but one that requires patience to navigate regulatory and supply chain challenges.

Investment Takeaway: TotalEnergies' SAF ambitions make it a key player in the energy transition. Investors seeking exposure to low-carbon fuels may consider a long-term hold, with close attention to feedstock supply dynamics and regulatory progress. The stock's success hinges on scaling SAF production without sacrificing margins—a tightrope walk that will define its future.