Generic Hero BannerGeneric Hero Banner
Latest market news

Phillips 66 to convert refinery to renewables: Update

  • Market: Biofuels, Emissions, Oil products
  • 12/08/20

Adds details and context throughout.

US independent refiner Phillips 66 plans to convert its San Francisco refining complex to the largest renewable fuels production site planned in the US.

The company over the next three years will idle crude processing at its 120,000 b/d San Francisco refinery and convert units in its Rodeo plant to produce 52,000 b/d of renewable fuels. The plans would halt crude processing at the refining complex by the end of 2023 to shift to renewable diesel, naphtha and jet fuel production in early 2024, pending regulatory approval.

Phillips 66 joins a wave of refinery conversions to renewables picking up speed after efforts to slow the spread of Covid-19 sharply reduced transportation demand. Marathon Petroleum earlier this month said it may convert its idled 166,000 b/d refinery in nearby Martinez to begin 48,000 b/d of renewable diesel production in 2022. Marathon said today that it continues to evaluate that project. HollyFrontier ceased crude processing this month at its struggling 52,000 b/d refinery in Cheyenne, Wyoming, refinery, with plans to convert the facility to 6,000 b/d of renewable diesel production in 2022. And CVR Energy is on a fast track to convert one of its units at the 73,000 b/d refinery in Wynnewood, Oklahoma, to renewable diesel production, while continuing to process crude oil.

State and federal incentives in California extend practical advantages for renewable diesel. Unlike biofuels such as ethanol and biodiesel, renewable diesel is chemically identical to petroleum diesel. That means the fuel can move in existing pipelines and other transportation options, and faces no blending limits in fuel systems. The distinction reduces the barrier to entry for an otherwise costly fuel. Producers may process renewable diesel from soybean oil, used cooking oil, animal fats and other feedstocks.

A federal tax credit extended last year through 2022 offers a $1/USG incentive for each renewable diesel or biodiesel gallon blended into the US transportation supply. The fuel generates 1.7 credits used to comply with federal blending mandates called the Renewable Fuel Standard, compared to 1 credit per gallon for ethanol and 1.5 credits per gallon for biodiesel. The fuel also generates credits under California's low carbon fuel standard, which vary in value depending upon the feedstock used.

Phillips 66 had previously considered a smaller conversion before deciding to halt petroleum processing completely. The company now plans what it said would be the largest renewables facility in the world. Production capacity at the site would surpass Valero's joint venture Diamond Green Diesel facility in Norco, Louisiana, where expansion work underway would bring the output to 44,0000 b/d next year, from 18,000 b/d currently.

"Quite frankly, the Rodeo refinery is uniquely positioned to become a renewable diesel plant," Phillips 66 executive vice president of refining Bob Herman said. "With its current infrastructure and location, the plant really lends itself to producing a lot of renewable fuels."

Extended shutdown

The San Francisco complex connects crude upgrading units in Arroyo Grande to refining units almost 200 miles away in Rodeo. The combination allows the complex to run a full gamut of crudes, from heavy, acidic and sour Canadian output, sour Opec imports and light sweet domestic production. Opec sour barrels averaged the highest share of imports to the facility over the past five years, according to the Energy Information Administration (EIA).

But a 2015 pipeline break disrupted supplies to the landlocked Arroyo Grande facility, and local regulators rejected rail and waterborne proposals for supply alternatives.

Phillips 66 declined to comment on specific operating margins for the San Francisco complex, but said its performance had worsened over the past three years. "Crude feedstock costs have been even more expensive than the price for benchmark crude," Herman said.

Phillips 66 plans to convert units in the Rodeo end of its complex and to shut the Arroyo Grande units in 2023. Associated crude pipelines would be taken out of service beginning in 2023.

The refinery produces 65,000 b/d of distillates, compared to 60,000 b/d of gasoline, making it one of three Phillips 66 refineries in the world tilted toward diesel. Rodeo also is a key supplier of US west coast 2pc sulphur petroleum coke. City officials earlier this year restricted coke movements through a key Richmond terminal, a decision challenged by companies including Phillips 66 and headed to oral argument in a federal court next week.

Refinery closings by Marathon Petroleum and Phillips 66 would leave Chevron and newcomer PBF Energy to continue petroleum refining in the immediate San Francisco area. Valero's 145,000 b/d refinery in Benicia, California, also supplies the northern California market.

Phillips 66 describes Rodeo as an export facility to Latin America, potentially tightening supplies along the west coast of Latin America, as well.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
17/03/25

EU prepares CBAM export scheme

EU prepares CBAM export scheme

Brussels, 17 March (Argus) — The European Commission is preparing a "solution" for exported goods under the bloc's carbon border adjustment mechanism (CBAM), to be presented before the end of the year. The commission will also expand the scope of the CBAM to "certain" steel and aluminium-intensive downstream products. The changes to the CBAM will be announced as part of a European steel and metals plan. In a draft of the plan to be formally presented on 19 March, the commission points to the need to address the problem of carbon leakage for CBAM goods exported from the EU to non-EU countries. The draft also notes that the commission is currently "quantifying" risks, before proposing an extension of the CBAM to "certain" steel and aluminium-intensive downstream products, so as to address the risk of European producers relocating outside the bloc to avoid higher carbon costs. The metals plan also announces an anti-circumvention strategy for the CBAM to be presented in the second half of 2025. The commission points to the risk of goods from low-carbon production facilities in non-EU countries being redirected to European customers, while carbon-intensive production continues for other markets. The metals plan also points to the risk of "greenwashing" carbon accounting practices, with "electro-intensive metals production benefiting from market-based instruments to appear low-carbon". The commission put forward proposals last month to simplify the CBAM, exempting some 90pc of the firms currently covered by the mechanism. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Find out more
News

Timing for EU's 2040 climate goal slips


17/03/25
News
17/03/25

Timing for EU's 2040 climate goal slips

Brussels, 17 March (Argus) — The European Commission appears to have pushed back an official proposal for a 2040 climate target for the EU, which will further delay the bloc's submission of a 2035 climate plan to the UN. The commission's agenda does not include the presentation of a legal proposal for a 2040 climate target before the end of the first quarter. The commission in February 2024 confirmed its preference for a 90pc cut in greenhouse gas emissions (GHGs) by 2040, from a 1990 baseline — but this was not a formal proposal. The commission had scheduled an amendment to the European Climate Law for the first quarter of 2025. That amendment would write an intermediate target for 2040 into EU law. The 2040 target would also provide the basis for the EU's updated nationally determined contribution (NDC) — or climate plan — to UN climate body the UNFCCC. Countries and jurisdictions were expected to submit updated NDCs, covering up to 2035, to the UNFCCC by 10 February. Officials said work is "ongoing" on the bloc's 2040 climate target. It would be presented "sooner rather than later" and there is still "time left until the end of the first quarter". An EU source indicated reluctance to present a 2040 climate plan before Poland's presidential elections on 18 May, which may have a runoff on 1 June. Poland chairs meetings of EU ministers until 1 July. The source also said several other parties to the UNFCCC have missed the 10 February deadline to submit their 2035 emissions reduction targets. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

UK launches anti-dumping probe into US-origin HVO


17/03/25
News
17/03/25

UK launches anti-dumping probe into US-origin HVO

London, 17 March (Argus) — The UK today began an anti-dumping investigation into hydrotreated vegetable oil (HVO) from the US. An application for the investigation was lodged by the UK Renewable Transport Fuel Association (RTFA) and UK-based biofuels producers Greenergy, Argent Energy and Olleco. The goods subject to investigation are "biodiesel obtained from synthesis or hydrotreatment of oils and fats of non-fossil origin, in pure form or as included in a blend". The UK trade remedies authority (TRA) specified that sustainable aviation fuel (SAF) is excluded from this definition. The investigation period spans from 1 January 2024 to 31 December 2024. During this time, the applicants allege HVO was imported into the UK at prices below the "normal value". They say this alleged dumping led to an actual and potential decline in production, domestic sales, and profitability. The UK removed transposed EU anti-dumping and countervailing duties on imports of HVO from the US and Canada in 2022. The EU first imposed anti-dumping duties for US-origin HVO in 2009 , and the current duties are in place until August 2026. Those in the market said the effect of the UK investigation is being mitigated by proposed guidance on the US 45Z clean fuel production credits released earlier this year. This has already slowed discussions around new imports of US-origin HVO into T1 duty markets. The guidance does not allow US producers to claim the tax credit using imported used cooking oil (UCO), meaning US supply of UCO-based HVO could decrease or be reserved for the domestic market, participants said. HVO, or renewable diesel, is a drop-in biofuel that can go well beyond the European 7pc blend wall for biodiesel. UK HVO consumption increased by 38pc on the year in 2024 to 699mn l, according to the latest provisional release of UK Renewable Transport Fuel Obligation statistics . This was mostly due to increased imports of US-origin HVO, according to market participants. Interested parties must register by 1 April, after which they will be able to submit comments. The TRA aims to make a final recommendation in March 2026. By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Brazil to pilot reforestation concession


17/03/25
News
17/03/25

Brazil to pilot reforestation concession

Sao Paulo, 17 March (Argus) — Brazil's Para state in the Amazon basin will concede reforesting 10,000 hectares (ha) in the Triunfo do Xingu environmental reserve as part of efforts to protect more rainforest ahead of the UN Cop 30 climate summit in November. The 40-year concession will require R258.3mn ($45.3mn) in investments and capture an estimated 3.7mn metric tonnes (t) of CO2 equivalent (tCO2e)/yr, according to the Para state government. The 1.6mn ha Triunfo do Xingu reserve, which was created in 2006, has seen significant environmental degradation in recent years from illegal deforestation. Last year, the reserve lost 1,400km² (870 mi²) to illegal deforestation, the bulk of which was converted into pastureland. The concession, which will be Brazil's first for reforestation, will be a test case for the government's efforts to recover its tropical forests and is possible because of legislation approved in 2023, which allows carbon offsets to be issued on public lands. The auction will take place on 28 March at the B3 stock exchange, in Sao Paulo state. The winner of the project will be allowed to sell carbon offsets and environmental services credits, which will be generated by reforesting and preserving the forest. The sale of some forestry products is also approved. The Para state government estimates that the concession will generate gross revenues of R21.7mn/yr. Para will also sell two other 10,000ha concessions later this year, it said. Brazil has continued to reduce deforestation in the Amazon forest. It lost just 80.9km² of Amazon rainforest in February, down more than 64pc from the same month last year. February deforestation was the lowest on record, according to the science and technology ministry's national space institute INPE. Brazil's goal is to eliminate all deforestation by 2030. Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

German gasoil demand rises but remains weak


17/03/25
News
17/03/25

German gasoil demand rises but remains weak

Hamburg, 17 March (Argus) — Wholesale diesel and heating oil sales in Germany continue to rise this year and supply is ample, particularly along the Rhine river. But demand remains weak compared with this time last year making imports uneconomical. Diesel demand is rising seasonally because of warmer temperatures and an associated uptick in agriculture and construction activity. Heating oil demand is being boosted by falling prices, which are as low as they were in December even with the increased German greenhouse gas (GHG) reduction quota and CO2 levy in place since the turn of the year. In the Rhine areas of western and southwestern Germany, the price of heating oil and diesel is lower than it is in northern, eastern and the southeastern Bavaria regions. This suggests that, partly because of ample refinery production in the west, available product exceeds current demand. Low Rhine water levels since the beginning of March, which reduce barge loadings upstream from Kaub, have not led to shortages. Another indication of low import demand is that freight rates have risen only slightly despite the low water levels and some canal closures. Argus ' calculations show spot imports from the Amsterdam-Rotterdam-Antwerp (ARA) hub along the Rhine would currently be loss-making. Maintenance work at the Bayernoil consortium's 215,000 b/d Vohburg-Neustadt refinery north of Munich, which started in early March, is leading to the highest regional prices in Germany. Traded spot volumes are correspondingly low. Gasoil imports by sea cargo into northern Germany are at their lowest level in at least two years. This could contribute to the price in northern and eastern Germany being somewhat higher than in the west and southwest. German diesel demand in 2025 remains below average in a multi-year comparison. The main reason for this is declining industrial production and a resulting decrease in freight activity. The German truck toll index fell to its lowest February value in eight years. By Johannes Guhlke Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more