Islamabad: The Asian Development Bank (ADB) and SAFCO Venture Holdings Limited have signed an $86.2 million financial agreement to develop a sustainable aviation fuel (SAF) production facility in Sheikhupura, Pakistan. This initiative marks the first private sector-led SAF project in Asia and the Pacific, aiming to reduce carbon emissions in the aviation industry.

According to Asian Development Bank, the funding comprises $41.2 million from ADB’s resources and $45 million in syndicated loans, with contributions from The Emerging Africa & Asia Infrastructure Fund and ILX. The International Finance Corporation is also providing a syndicated parallel loan. ADB will act as the lender of record for the B-loans and as the lead arranger and bookrunner for the financial package.

The Sheikhupura facility will produce SAF using waste-based feedstock such as used cooking oil, with an annual capacity of 200 kilotons. Shell Eastern Trading has entered into a long-term agreement with SAFCO for up to 145,000 tons of SAF annually from the facility. This agreement aligns with Shell’s strategy to supply low-carbon fuels and enhance airline access to SAF.

The SAF project, which is the first financed by ADB in its developing member countries outside of China, is expected to significantly reduce carbon emissions, contributing to a yearly reduction of up to 500,000 tons of carbon dioxide equivalent emissions. The initiative also highlights ADB’s commitment to climate innovation under its Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP).