ExxonMobil exits, Vitol enters California RD project

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