- Phillips 66 becomes latest energy company seeking to convert an oil refinery into a biofuels plant to take advantage of robust demand for green fuels.
- Economic recession brought on by the COVID-19 pandemic has hurt demand for oil and gas and other energy sources, leaving companies scrambling to find new sources of income.
- Despite weak demand for other refined products, consumer appetite for biodiesel has stayed above a 5-year average, say analysts.
Amid a downturn in the demand for fossil fuels, Phillips 66 is the latest in a line of energy companies announcing plans to convert oil refineries into biofuels plants, in a bid to take advantage of rising consumer appetite for alternative fuels and fuel credit offerings, say experts.
Phillips 66 plans to repurpose one of its oil refineries in San Francisco, from producing fuels from crude to making biofuels with inputs such as cooking oil and soybean oils. The Houston-based company says the new plant, called Rodeo Renewed, may become the largest renewable fuels facility in the world — churning out 800 million gallons a year of different combustible fluids, including sustainable jet fuel, renewable diesel and gasoline. Local authorities still need to approve the project, which Phillips says may become operational by 2024.
A shrinking economy brought on by the COVID-19 pandemic has hurt demand for oil and gas and some other energy sources, leaving companies scrambling to find new sources of revenue like catering to the demand for biofuels, which has proven resilient during the outbreak, say analysts at the data company Genscape, a part of the energy-consultancy Wood Mackenzie.
“Biodiesel demand has stayed strong this year. Despite the crash in demand for other refined products, biodiesel demand stayed above the 5-year average,” Jim Venhoff, a senior research manager at Genscape, wrote in an email interview with Karma.
Analysts have observed a rise in demand for renewable diesel being imported from Singapore to California since mid-2019. The U.S. is taking in an average of 373,000 barrels per month of renewable diesel, according to a six-month average of import data, says Genscape.
Phillips 66, a diversified energy company with $55 billion of assets as of June this year, is part of a group of companies trying to reinvent some of their business. This year, HollyFrontier Corp. announced plans to convert its refining facility in Wyoming to a renewable diesel plant, while Marathon Petroleum Corp., has said it may convert two crude processing facilities to green diesel plants, Bloomberg reports.
Companies like Phillips 66 may be trying to cash in on California’s fuel credits program that allows fossil fuel producers to buy credits from renewable energy suppliers to offset their carbon emissions, said Amanda Fairfax, a senior research analyst at Genscape.
The state has implemented the credit program to reduce greenhouse gases and fight climate change.
“Another motivation to convert refineries to biofuel production in California is likely due to the ability to ‘double dip’ on renewable fuel credits,” Fairfax said. “In California, you can acquire both renewable identification numbers and low carbon fuel standard credits. Both credits have a market value and can be sold to other market participants.”