Phillips 66 completes Rodeo renewables conversion

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