P66, Marathon RD conversions clear California hurdle
Northern California regulators cleared Phillips 66 and Marathon Petroleum to proceed with converting their petroleum refineries into the two largest US renewable diesel (RD) production facilities, dismissing appeals from environmental campaigners seeking to slow the projects.
The Contra Costa County Board of Supervisors yesterday voted unanimously to authorize land use permits allowing Phillips 66 to convert its 120,000 b/d Rodeo refinery near San Francisco into a 67,000 b/d renewable diesel facility. The regulators also unanimously approved a permit allowing Marathon Petroleum to convert its idled Martinez refinery into a 48,000 b/d renewable diesel facility by 2023.
Environmental justice groups the Natural Resources Defense Council and Communities for a Better Environment earlier this year appealed to the Contra Costa County Board of Supervisors to send the projects' environmental impact reports back to the county's planning commission for more scrutiny.
Environmental campaigners in California have persisted in calling for regulators to impose stricter requirements on the renewable diesel conversions, citing concerns over local community impacts, renewable fuel production hazards and deforestation concerns associated with the harvesting of soybeans, a key feedstock.
But state and county officials have continued to support the companies' visions for the projects, which would create the largest two US renewable diesel refineries within a 20-mile stretch just east of the San Francisco Bay, with Phillips 66 laying claim to the largest such facility in the world. In addition to recognizing renewable diesel's role in reducing hard-to-abate emissions from long-haul trucking, supervisors suggested that stopping local projects would do little to slow the growth of renewable diesel production.
"The fact of the matter is that whether if we approve these projects here in Contra Costa or not, these fuels are going to be manufactured somewhere," supervisor John Gioia said today during a hearing on the appeal against the Phillips 66 Rodeo project. "Our action here approving or denying is not going to stop the manufacture of these fuels."
Renewable diesel production in the US is forecast to increase by 75pc this year and another 25pc next year as planned new capacity comes online, according to the Energy Information Administration (EIA).
Authorization of the land use permit concludes the required environmental review behind the Martinez project, but a few more permits are forthcoming before groundbreaking, Marathon Petroleum said. The Phillips 66 decision paves the way for a final investment decision on Rodeo "in the coming weeks," the company told Argus.
Full production in 2023, 2024
Both the Rodeo and Martinez projects will repurpose existing crude oil refining units to turn soybean oil, tallow and other feedstocks into renewable diesel eligible for federal and state renewable fuel credits.
Marathon hopes to start up production of renewable diesel at Martinez by the second half of this year, with full rates expected in 2023. The company has partnered in the project with Finnish biofuels producer Neste, which will provide $1bn toward the $1.2bn project through a proposed 50-50 joint venture. The joint venture deal should close now that Marathon has secured the land use permit, US bank Cowen analyst Jason Gabelman said.
Phillips 66 has chosen to go it alone on its project for now, with chief executive Greg Garland saying on 29 April that the company "does not really need the expertise that others might need" given its fuels marketing business and forays into renewable fuels production at its 230,000 b/d Humber refinery in Killingholme, UK.
Phillips 66 expects Rodeo to hit full production rates in 2024. The company last year took a minority stake in Shell Rock Soy Processing in Iowa, through an agreement granting it 100pc ownership of the processing plant's 4,000 b/d soybean oil output.
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ExxonMobil exits, Vitol enters California RD project
ExxonMobil exits, Vitol enters California RD project
New York, 26 June (Argus) — A company hoping to construct a 15,000 b/d renewable diesel refinery in Bakersfield, California, this year has settled a dispute with ExxonMobil and inked a new offtake deal with Swiss commodity trader Vitol, providing a reprieve for a project that has been financially stressed. Global Clean Energy Holdings will pay ExxonMobil $18.2mn as a one-time settlement and cancel all 125,000 shares of Global Class C preferred stock that the US oil major had owned, according to a regulatory filing on Wednesday. Two ExxonMobil employees have exited the Global Clean Energy board. The two companies will also ask the Delaware Court of Chancery to dismiss a complaint brought by ExxonMobil that alleged wrongdoing. ExxonMobil had previously moved to cancel an offtake agreement to purchase much of the plant's expected output, citing various production delays, and asked the Delaware court to compel the release of Global internal files. A Global subsidiary has entered into a new agreement with Vitol, in which the trading firm will be the "exclusive supplier of renewable feedstocks" to the Bakersfield plant and "exclusive offtaker" of all renewable diesel and naphtha produced by the facility and its associated environmental attributes, according to the filing. The two companies also entered into a revolving credit agreement, which provides Global with a working capital loan of $75mn. Global Clean Energy has said it wants the facility's primary feedstock to be camelina oil, which would be more able to capitalize on low-carbon fuel incentives because it comes from a cover crop. But the company said in an April regulatory filing that it expects to use only a "minimal amount" of camelina oil in 2024 and 2025. The filing on Wednesday also lists soybean oil, canola oil, and various waste feedstocks, such as used cooking oil, as potential feedstocks Vitol could supply. The agreement with Vitol provides fresh hope for the long-delayed Bakersfield project, one of a handful of renewable fuels facilities that have set plans to come online in California. Global Clean Energy as recently as last month warned there was "substantial doubt" about its ability to survive, given its debt obligations and the uncertain timing for completing its facility. Vitol can terminate the supply and offtake agreement, which is otherwise set to last for three years and can be extended for two more, if the project is not producing at least 5,000 b/d of renewable diesel by 31 October this year. Global Clean Energy declined to provide more details on its construction timeline today but said in a regulatory filing last month that it planned to commence "the start-up phase" of the project this month and begin initial commercial operations during the third quarter. The facility, if completed, could face additional headwinds. Declining prices over the last year for federal renewable identification numbers (RINs) and California low-carbon fuel standard credits have depressed margins for renewable diesel producers. And the growth of biorefineries in the state — including Phillips 66's Rodeo facility that the company said Wednesday is running at full capacity — could mean steep competition for feedstocks. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Mexico’s gasoline, diesel prices hit record highs
Mexico’s gasoline, diesel prices hit record highs
Mexico City, 26 June (Argus) — Mexico's average retail prices for gasoline and diesel have increased to all-time highs, driven by relatively lower tax deductions and higher international prices. Retail prices for regular gasoline in Mexico reached Ps23.73/l ($4.95/USG) on 25 June, up by 8pc from a year earlier and the highest since Argus in July 2018 started tracking prices reported by retailers to the energy regulatory commission (CRE). Regular gasoline's average retail price surpassed the Ps23/l barrier on 16 February for the first time. Similarly, national average retail prices for diesel reached an all-time high Ps25.38/l on 25 June, up by 7pc from a year earlier, the same data show. The hike was in part supported by a combination of lower tax deductions, higher international prices and a weaker Mexican peso. The excise tax deduction for regular gasoline was set at Ps0.3621/l for the 22-28 June week, down from a Ps1.2845/l tax deduction in the same week of 2023. Meanwhile, diesel subsidies were 15pc lower for the 22-28 June week year over year. At the same time, delivered regular gasoline prices to Mexico's east coast from the US Gulf coast — which provides most of Mexico's imports — rose by 5pc to $2.34/USG on 25 June, up from $2.22/USG a year earlier, according to Argus assessments. Delivered diesel prices to Mexico's east coast from the US Gulf coast rose by 10pc to $2.50/USG on 25 June year-over-year. Furthermore, the Mexican peso's post-election depreciation has made fuel imports more expensive. The exchange rate stood at Ps18.13/$1 on 25 June, up by 5pc from Ps17.14/$1 a year earlier, according to Mexico's central bank Banxico. By Antonio Gozain Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Phillips 66 completes Rodeo renewables conversion
Phillips 66 completes Rodeo renewables conversion
Houston, 26 June (Argus) — Phillips 66's Rodeo, California, refinery has completed a multi-year, billion-dollar conversion to process only renewable feedstocks, increasing throughput rates to 50,000 b/d. The 128-year-old Rodeo plant stopped processing crude in February , taking up to 115,000 b/d of oil refining capacity offline as it transitioned to producing renewable diesel (RD) and, eventually, sustainable aviation fuel (SAF). The plant initially bought and refined pre-treated feedstocks while building its own 40,000 b/d pre-treatment unit (PTU), whose two 20,000 b/d trains will prepare raw feeds such as used cooking oil, fats, greases and vegetable oil for Rodeo's three renewable diesel units (RDUs) before the end of this month. "The pre-treatment area will run at max rates as soon as it's commissioned," and refine harder-to-process feedstocks later in the year, Rodeo refinery manager Jolie Rhinehart told Argus on site at the plant earlier this month. "Our units will be able to process the lowest carbon intensity (CI) feedstocks, something that's called brown grease." There is also a financial incentive to process lower CI feeds. "That's how you really make money in these assets," Phillips 66 chief executive Mark Lashier told investors at the JP Morgan Energy Power & Renewables conference earlier this month. While optimizing feedstocks may help boost profits at the plant, Low Carbon Fuel Standard (LCFS) credits — which provide much of the financial incentive for renewable fuel conversions — are in the doldrums. A robust supply of low-carbon fuels such as RD to west coast markets has outstripped demand in recent years, helping drive down LCFS credit prices to nine-year lows earlier this month. But the unbalanced market has not led Phillips 66 to alter its strategy. Ample demand for renewable fuels There will be "ample" demand for Rodeo's refined products in the short-term, Rhinehart told Argus . "One thing that is stronger than ever is demand for liquid transportation fuels in the state of California." She plans to run the Rodeo plant like Phillip 66's other crude refineries, altering throughputs according to the cost and availability of feedstocks and the price that it can sell finished product. "We're not going to run if we're not making money," Rhinehart said. Still, the company has signaled its intention to run high rates. "We see good economic incentives to run and run full [at Rodeo]," Lashier told conference attendees, noting that while LCFS credits are "compressed," feedstock costs are also lower than the company anticipated. Another part of the profitability equation Phillips 66 does have control over is the infrastructure to distribute RD, selling Rodeo's product alongside conventional fuels at its "76" brand gas stations across the west coast. The company owns a products pipeline that connects Rodeo to a Phillips 66 marine and truck rack terminal on the San Francisco Bay, just south of Chevron's 245,000 b/d Richmond refinery ( See map). "We're very confident in our ability to place all those [renewable product] barrels locally," Rhinehart said. "And if there's demand outside of the region, we will surely supply that if the market supports it." Rodeo has so far supplied RD to California, Washington and Oregon and the Canadian province of British Columbia. Like a conventional crude refinery, the Rodeo complex will also periodically reduce throughputs for maintenance. Rhinehart expects a catalyst change for one of its reactors every year-and-a-half and a full catalyst change for all reactors every three years. Although Rodeo is up and running, permitting difficulties could preclude any future expansion of the plant. Rhinehart has a "substantial" list of projects she would like to progress, potentially including green hydrogen, but worries whether the company could make it through the permitting process. This was a concern also voiced by Phillips 66's executive vice president of emerging energy and sustainability Zhanna Golodryga in an interview with Argus at the company's Houston headquarters earlier this month. "We probably could have brought Rodeo online sooner if we didn't have to wait for some permits," she said in reference to a back-and-forth with Contra Costa County late last year over Rodeo's environmental impact review. Golodryga is eyeing the Gulf coast for Phillips 66's next low carbon energy hub, believing that Texas is the energy transitions Silicon Valley. By Nathan Risser Phillips 66's west coast refining assets Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan’s MUFG Bank to fund US-based SAF firm LanzaJet
Japan’s MUFG Bank to fund US-based SAF firm LanzaJet
Osaka, 26 June (Argus) — Japanese megabank MUFG Bank plans to finance US sustainable aviation fuel (SAF) firm LanzaJet, as it expects global SAF demand to rise given the aviation sector's efforts to decarbonise. MUFG said on 26 June that it will provide over ¥1bn ($6.3mn) to promote LanzaJet's alcohol-to-jet (AtJ) technology, scale up SAF production plants and develop a supply chain of its feedstocks. The companies on 21 June signed an agreement, through which MUFG may secure up to a 5pc stake in the US firm. MUFG is looking to take advantage of expected rises in SAF demand and relevant financial support needs. The company has forecast global funding requirements for SAF businesses to reach ¥1 trillion by 2030. LanzaJet in January opened its first SAF facility in the US state of Georgia, which produces 9mn USG/yr (652 b/d) through its AtJ technology using sugarcane-based ethanol. The low-carbon aviation fuel could reduce greenhouse gas emissions by 80pc relative to conventional jet fuel. MUFG plans to create new SAF projects in Japan through the latest deal, by leveraging on LanzaJet's AtJ process. The country's SAF demand is forecast to increase to around 1.72mn kl in 2030, comprising 880,000kl for domestic flights and 840,000kl for international flights. Tokyo will mandate that SAF has to account for at least 10pc of domestic airlines' jet fuel consumption by 2030. Japanese trading house Mitsu, one of LanzaJet's founding investors, and refiner Cosmo Oil are planning to produce SAF through the LanzaJet's AtJ technology . The companies are targeting production of 220,000kl of SAF and 20,000kl of biodiesel, which is a by-product of SAF, by the April 2027-March 2028 fiscal year. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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