"We can confirm that we are stopping the exploration of two projects - a biofuels unit and a Group II base oil plant in Singapore," the company told Reuters in an emailed statement.

"We will continue supplying base oil and lubricants, as well as biofuels, to our customers in Singapore and the region."

Shell announced in late 2021 that it was studying a 550,000 tonnes per year project at Singapore's Bukom Island to produce sustainable aviation fuel (SAF) to supply major Asian hubs such as Hong Kong International Airport and Singapore's Changi.

The company had planned to make a final investment decision for the project by early 2023.

Unlike Europe and the United States, there is no mandate for airlines to use SAF, an industry source said, adding that customers were not willing to accept higher costs for the fuel.

Aviation, accounting for 3% of the world's carbon emissions, is one of the most difficult forms of transportation to decarbonise.

(Reporting by Trixie Yap and Florence Tan; Editing by Jan Harvey and Christina Fincher)

By Trixie Sher Li Yap and Florence Tan