(Bloomberg) – The latest sign of a global energy transition: Major oil refineries in the western United States are being converted to biofuel plants.
Phillips 66 on Wednesday became the latest in a string of U.S. refiners to say it was converting an oil refinery in California to a biofuel plant as gasoline loses its luster in favor of fuels derived from agricultural products and waste . The company said its 120,000-barrel-per-day Rodeo refinery near San Francisco would become the world’s largest plant producing so-called renewable diesel, as well as gasoline and jet fuel, from cooking oil. used, grease, grease and soybean oils.
The announcement came about a week after fuel giant Marathon Petroleum Corp. said it could convert two refineries into renewable diesel plants. In June, HollyFrontier Corp. announced it will transform its refinery in Cheyenne, Wyoming, into a renewable diesel plant by 2022.
As refiners across the United States battle depressed fuel demand and an uncertain future amid the pandemic, California’s fight with global warming offers a path to survival. Demand for so-called renewable diesel is increasing in the Golden State, where fuel suppliers are buying credits from clean energy producers to offset their emissions as part of a program designed to reduce emissions from transportation in the region of 20. % by 2030.
“There is overcapacity in the refining market,” Marijn van der Wal, biofuels advisor at Stratas Advisers in Singapore, said on Wednesday. “Are we going to shut down our refineries or are we going to reuse them?”
The LCFS credits along with the recently reintroduced federal RIN D5 credits and tax credits for blenders generate about $ 3.32 per gallon in subsidies for renewable diesel producers, which is enough to cover production costs, a Van der Wal said in a report last June.
“It is a staggering amount,” he said over the phone. “You’ll make a lot of money as long as all of these grants come in.”
The Rodeo plant is well suited for conversion because of its dock and rail access to accommodate the tallow, vegetable oils and used cooking oils that will feed the plant, said Nik Weinberg-Lynn, director of renewable energy projects at Phillips 66, by phone. The facility has two hydrocrackers that are important for the conversion process as well as an abundant supply of hydrogen. In addition, the factory is located where the demand is greatest.
“California’s renewable diesel market is certainly the largest in the world,” he said.
Phillips 66 plans to invest $ 700 million to $ 800 million in the conversion, including building a pre-treatment facility, Weinberg-Lynn said. The Rodeo plant could start operating as early as 2024, producing 680 million gallons per year of about 70% renewable diesel, 10% gasoline and 20% jet fuel, the company said.
The San Francisco refinery has an additional project underway that is expected to start in the second quarter of 2021 and will produce 120 million gallons per year of renewable diesel. Phillips 66 also announced that it will close its 45,000 bpd plant in Santa Maria in 2023. The shutdown comes after years of declining retail gasoline sales in the state, according to data from Energy Information Administration.
Last week, Marathon announced it would convert its 166,000 bpd refinery in Martinez, Calif., Into a terminal and which could include a 48,000 bpd renewable diesel plant as early as 2022. The company is running its 19,000 barrels. – a one-day plant in North Dakota into a renewable diesel plant by the end of this year.
The influx of new entrants into California’s renewable diesel market is creating its own problems, Van der Wal said. So many projects are being proposed that there may not be enough diesel demand in California to absorb the additional fuel. Additionally, existing renewable diesel suppliers in California, including Neste SA and Valero Energy Corp., have locked down much of the feedstock, leaving less tallow and cooking oil for new entrants.
Phillips 66 has yet to get all the raw materials needed for the plant, but he’s confident he can, Weinberg-Lynn said.
“We strongly believe, although it will be a challenge, that there is enough,” he said.
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