Phelan Green’s planned electro sustainable aviation fuel project in Saldanha Bay has reached final investment decision, making it the first project in South Africa’s initial green hydrogen program to reach that stage, according to the South African government.
The company has committed $100 million in equity and secured an offtake agreement, with construction expected to begin in the first quarter of 2027 and first exports targeted for the first quarter of 2029.
The milestone is significant in a South African hydrogen market where project announcements have substantially outpaced committed investment. The International Energy Agency’s 2026 Global Hydrogen Review identifies 31 low emissions hydrogen projects in Africa targeting production by 2030, with only one having reached FID. The agency identifies high financing costs as one of the main barriers to deployment.
Phelan’s project therefore provides an important test of whether South Africa can move from a large development pipeline toward construction and export revenues. The government says the first wave of its national green hydrogen program comprises six projects, with Phelan’s eSAF facility currently leading that portfolio by investment stage.
The project’s technology configuration is relatively well defined. Johnson Matthey has licensed its HyCOgen and FT CANS technologies for the first phase, while Honeywell UOP will provide its Fischer Tropsch Unicracking technology. HyCOgen converts captured carbon dioxide and electrolytic hydrogen into carbon monoxide, which is combined with hydrogen to produce syngas. FT CANS then converts the syngas into synthetic crude, which Honeywell’s technology upgrades into synthetic paraffinic kerosene suitable for aviation fuel applications.
The first phase is expected to produce approximately 35,000 metric tons of eSAF annually. Johnson Matthey estimates that volume could represent up to 6% of the EU and UK’s combined mandated eSAF volumes for 2030. The broader Phelan Green development is expected to reach approximately 140,000 metric tons of annual eSAF production once all phases are completed.
The distinction between the first phase and the wider development is important when assessing the project’s financing. Phelan Green’s broader hydrogen and e-fuels development has been associated with an investment of approximately R47 billion, or more than £2 billion, according to Johnson Matthey. That figure should not be treated as the capital requirement for the initial 35,000 ton eSAF phase.
The $100 million equity commitment disclosed alongside the FID also does not establish the complete financing structure. The government has confirmed the equity commitment and an offtake agreement, but public disclosures do not provide the full debt package, the value and tenor of the offtake, or the agreed pricing mechanism. Those details will be important in determining how much project risk has actually been transferred from the developer to lenders and buyers.
The offtake is particularly relevant because eSAF remains a policy driven market. Under the EU’s ReFuelEU Aviation regulation, the minimum share of synthetic aviation fuel supplied at EU airports is 1.2% in 2030, rising to 2% in 2032 and 35% by 2050. The wider SAF obligation reaches 70% by 2050.
This creates a defined future market for synthetic fuels, but regulation alone does not eliminate the commercial gap between eSAF and conventional jet fuel. The European Council has previously identified low supply and high prices relative to fossil aviation fuels as major obstacles to SAF deployment.
For a South African producer targeting European buyers, the economics will consequently depend on more than access to renewable electricity. The project must secure sufficient renewable power and water, maintain high electrolyzer utilization, obtain suitable carbon dioxide and meet the emissions and sustainability requirements attached to the European market.
Carbon sourcing is particularly important for a power to liquid project. Johnson Matthey describes HyCOgen as a process that can convert captured CO2 and green hydrogen into syngas for subsequent Fischer Tropsch synthesis. The resulting fuel therefore depends on both the availability and qualifying characteristics of the carbon source as well as renewable hydrogen production.
The technology stack itself is not the only differentiator. The project’s ability to reach FID places greater emphasis on execution. The South African government expects construction to begin in early 2027, while Johnson Matthey had previously indicated that construction was expected to start by the end of 2026. The latest government timetable therefore provides the clearest current schedule for the project.
Phelan is also moving ahead while other projects in South Africa remain at different stages of development. Hive Hydrogen’s Coega Green Ammonia Project, for example, has secured $20 million in development funding from the SA H2 Fund and has targeted FID for the third quarter of 2027. Its planned 850 MW electrolyzer and more than 1 million metric tons of annual green ammonia production make it substantially larger than Phelan’s initial eSAF phase, but it remains in development rather than construction.
The comparison illustrates the financing challenge facing South Africa’s hydrogen strategy. Development funding can move projects through engineering, permitting and offtake negotiations, but FID requires a much more complete commercial structure. The SA H2 Fund’s support for Coega includes development funding and a potential construction investment of up to $200 million, subject to the project reaching its investment decision.
Phelan’s FID consequently changes the question facing South Africa’s hydrogen sector. The immediate issue is no longer whether a large e-fuels project can be announced or whether the technology pathway exists. The next test is whether the project can translate committed equity, contracted demand and selected process technologies into construction and ultimately certified fuel exports.
