SYNTHETIC FUEL MARKET ANALYSIS

Global synthetic fuel market is expected to be valued at US$ 5.60 Bn in 2023, and is projected to reach US$ 19.82 Bn by 2030, exhibiting a CAGR of 19.8% from 2023 to 2030.

Global synthetic fuel market growth is driven by increasing demand for cleaner and more sustainable fuels, rising cost of crude oil, and growing focus on energy security.

Synthetic fuels are produced from a variety of feedstocks including , coal, and natural gas. These are chemically similar to conventional fuels, and can be used in existing combustion engines without modification. However, synthetic fuels have a number of advantages over conventional fuels

Global Synthetic Fuel Market- Regional Insights

• North America is the largest market for synthetic fuel, and accounted for over 35% of the global market share in 2022 due to high demand for synthetic fuels in the transportation sector, as well as the availability of raw materials and infrastructure for production. The U.S. is the largest market for synthetic fuels in North America, followed by Canada and Mexico.
• Europe is the second largest market for synthetic fuel, and accounted for over 24% of the global market share in 2022. The demand for synthetic fuels in Europe is driven by the need to reduce gas emissions and the availability of government subsidies for the production of synthetic fuels. Germany, France, and the U.K. are the largest markets for synthetic fuels in Europe.
• Asia Pacific is the fastest growing market for synthetic fuel, with a CAGR of over 17% from 2022 to 2030. The demand for synthetic fuels in Asia Pacific is driven by growing economies of China and India, as well as increasing air pollution levels in the region. China is the largest market for synthetic fuels in Asia Pacific, followed by India and Japan.

Figure 1. Global Synthetic Fuel Market Share (%), By Region, 2023

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Global Synthetic Fuel Market- Drivers

• Carbon Emission Reduction Goals: Governments and organizations around the world are setting ambitious targets to reduce carbon emissions and combat climate change. Synthetic fuels offer a way to decarbonize sectors that are challenging to electrify directly, such as aviation, heavy industry, and long-haul shipping. For instance, on November 17, 2022, The U.S. Council on Environmental Quality (CEQ) launched the Global Net-Zero Government Initiative with 18 countries joining the U.S. to slash emissions from government operations. Countries that participate in the initiative commit to achieving net-zero emissions from national government operations by no later than 2050, developing a roadmap by COP28 that outlines the pathway for achieving the net-zero commitment with interim targets, and publishing the roadmap upon completion.
• Energy Security: As the world seeks to diversify its energy sources and reduce reliance on fossil fuels, synthetic fuels can provide an alternative energy carrier that can be produced from a variety of renewable resources, reducing dependence on imported fossil fuels.
• Compatibility with Existing Infrastructure: Synthetic fuels can be blended with conventional fuels or used in existing internal combustion engine technologies without significant modifications to infrastructure. This compatibility makes them a more feasible option for transitioning away from fossil fuels.
• Intermittent Renewable Energy: Renewables like solar and wind energy are intermittent in nature, often producing excess energy during certain periods. Synthetic fuel production can serve as a way to store this excess energy in chemical form, making it available when renewable generation is low.

Global Synthetic Fuel Market- Opportunities

• Carbon Emission Reduction: The primary opportunity for synthetic fuels lies in their potential to significantly reduce carbon emissions from sectors that are challenging to electrify, such as aviation, shipping, and heavy industry. As countries and industries strive to meet their climate targets, synthetic fuels can play a crucial role in achieving carbon reduction goals. For instance, on September 29, 2022, The U.S. Government Accountability Office (GAO) published an assessment including policy options for carbon capture and storage (CCS) and carbon utilization technologies, which are expensive but could reduce carbon dioxide emissions.
• Energy Storage and Grid Balancing: Synthetic fuels can serve as a form of energy storage, allowing excess renewable energy to be stored in the form of chemical bonds. During periods of low renewable energy production, these fuels can be converted back into electricity or used directly, thus contributing to grid stability and balancing intermittent energy sources.
• Technology Innovation: Continued research and development in electrolysis, catalysis, and other conversion technologies are likely to lead to more efficient and cost-effective methods for producing synthetic fuels. Advancements in materials science and process optimization can drive down production costs and improve overall energy efficiency. For instance, in January 2022, the U.S. Department of Energy hosted the Advanced Liquid Alkaline Water Electrolysis Experts Meeting aimed to convene electrolysis experts to discuss water electrolysis, a key hydrogen production pathway to implement the H2@Scale vision and achieve the Hydrogen Shot US$ 1/kg clean hydrogen target.
• Circular Carbon Economy: The concept of a circular carbon economy, which involves capturing and recycling carbon emissions, can be realized through the production of synthetic fuels using captured CO₂. This approach not only reduces emissions but also helps utilize waste carbon from industrial processes.

Global Synthetic Fuel Market- Trends

• Advancements in Production Technologies: There is growing focus on improving the efficiency and cost-effectiveness of production technologies for synthetic fuels. Innovations in electrolysis, catalysis, and reactor design are pursued to enhance the overall production process. For instance, on July 11, 2023, The International Energy Agency (IEA) published a chart showing planned commercial. The chart highlights the importance of using CO₂ from non-fossil sources to produce synthetic fuels.
• Partnerships and Collaborations: Industry players, governments, and research institutions are forming partnerships and collaborations to accelerate the development and deployment of synthetic fuel technologies. These collaborations aimed to leverage expertise and resources to address technical challenges and bring about commercial-scale production.
• Growing Investment and Funding: The synthetic fuel sector is attracting increased investment from both private and public sources. Investors are recognizing the potential of synthetic fuels as a means to decarbonize sectors like aviation and shipping, leading to funding for research, pilot projects, and commercialization efforts.
• Policy Support and Regulations: Governments in various regions are considering or implementing policies to support the adoption of synthetic fuels. This included incentives, subsidies, and emissions reduction targets that encouraged the growth of the market.

Global Synthetic Fuel Market- Restraints

• High Production Costs: The production of synthetic fuels, especially through processes like electrolysis, can be energy-intensive and expensive. The cost of producing synthetic fuels is often higher as compared to conventional fossil fuels, and this can limit their economic competitiveness.
• Energy Efficiency Concerns: Some synthetic fuel production methods, such as the conversion of renewable electricity into hydrogen for further fuel synthesis, could involve energy losses at various stages. The overall energy efficiency of the process is concern, particularly when considering the net energy gain relative to the energy invested.
• Competing Technologies: Global synthetic fuel market faced competition from other renewable technologies, such as battery electric vehicles (BEVs) and hydrogen fuel cells. These technologies are gaining traction in sectors like transportation and could divert attention and resources away from synthetic fuels.
• Infrastructure Challenges: The distribution and storage infrastructure for synthetic fuels were limited as compared to the well-established infrastructure for fossil fuels. Retrofitting or building new infrastructure to accommodate synthetic fuels could be a time-consuming and expensive process.
• Counterbalance: The growing awareness about environmental issues and the need to reduce carbon emissions have increased demand for synthetic fuels, which are cleaner alternatives to traditional fossil fuels.

Global Synthetic Fuel Market- COVID-19 Impact

• The COVID-19 pandemic had a significant impact on the global synthetic fuel market. Synthetic fuels are produced from non-renewable resources such as coal, natural gas, and biomass, and are used as a substitute for traditional fossil fuels. The pandemic has caused decline in demand for synthetic fuels due to reduced economic activity and travel restrictions.
• The aviation industry, a major consumer of synthetic fuels, has been hit hard by the pandemic. With reduced air travel, demand for synthetic jet fuel has decreased significantly. The shipping industry, another major consumer of synthetic fuels, has also been impacted by the pandemic, with reduced demand for marine fuels.
• On the supply side, the pandemic has disrupted the production and supply chains of synthetic fuel producers. Many producers had to shut down or reduce production due to labor shortages, supply chain disruptions, and reduced demand.

Global Synthetic Fuel Market- Analyst Viewpoint

• Global synthetic fuel market holds promising growth opportunities over the next decade. The market growth is driven by the need to reduce dependence on fossil fuels and transition to cleaner sources of energy, demand for synthetic fuels such as biofuels is expected to increase steadily. Government incentives and initiatives to promote renewable fuels will further propel the synthetic fuel industry. However, high production costs remain a key restraint to the market's expansion as synthetic fuels are more expensive than conventional gasoline and diesel.
• North America currently dominates the global synthetic fuel market, owing to supportive regulatory policies. The U.S. has set ambitious targets to increase biofuel blending mandates, and this is expected to drive the market growth. Asia Pacific is anticipated to be the fastest growing regional market with China emerging as a major producer. Rapid industrialization and growth in road and air transport are doubling energy needs in the region. This presents synthetic fuel producers with lucrative prospects.
• While synthetic diesel and gasoline still account for a minor share of the overall transportation fuel demand, their usage is projected to increase multi-fold over the next decade. Innovation in production technologies aims to lower costs and improve efficiency

Global Synthetic Fuel Market- Recent Developments

New Product Launches

• In 2021, (world's largest publicly traded international oil and gas company) launched its EcoSynthesis Fuel, a synthetic fuel made from renewable biomass. EcoSynthesis Fuel is  carbon neutral, and can be used in existing vehicles without any modifications.
• In 2022, Sasol (Integrated energy and chemical company) launched its Synfuels, a range of synthetic fuels made from coal and gas. Synfuels are cleaner-burning than traditional fossil fuels, and can be used in a variety of applications including transportation, power generation, and industrial processes.
• In 2023, .launched its Green Ammonia-to-Liquids (GAL) technology that can be used to produce synthetic fuels from renewable energy sources. GAL technology is said to be more efficient and cost-effective than other methods of producing synthetic fuels.

Acquisition and Partnerships

• In 2022, ExxonMobil acquired Clean Energy Fuels, a leading provider of natural gas and hydrogen refueling infrastructure. This acquisition will help ExxonMobil to expand its presence in the renewable fuels market.
• In 2021, Shell (British multinational oil and gas company) acquired Velocys, a company that develops and licenses technology for converting biomass into synthetic fuels. This acquisition will help Shell to develop its own synthetic fuel production capacity.
• In 2020, Air Liquide (A world leader in gases, technologies and services for Industry and Health) and TotalEnergies (French multinational integrated energy and petroleum company ) formed a joint venture to develop and commercialize synthetic fuels. This joint venture will combine the expertise of two leading energy companies to accelerate the development of this promising technology.

Figure 2. Global Synthetic Fuel Market Share (%), By End –Use Application, 2023

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Top companies in Global Synthetic Fuel Market

• Sasol
• Shell
• Chevron
• ExxonMobil
• BP (British Petroleum)
• Synfuels China
• Rentech, Inc.
• Fischer-Tropsch Technology
• Linc Energy
• DKRW Advanced Fuels

*Definition: Global synthetic fuel market refers to the industry that focuses on the production and distribution of fuels manufactured from feedstocks other than traditional fossil fuels, typically using chemical processes, gasification, and other technologies. These fuels are designed to substitute conventional fuels like gasoline, diesel, and jet fuel in transportation and other applications.