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CVR pauses renewable diesel plans as feedstock prices surge

Reuters
·2 min read

Aug 3 (Reuters) - Carl Icahn's CVR Energy is pausing plans to produce around 7,000 barrels per day of renewable diesel at its Wynnewood, Oklahoma, refinery due to high feedstock prices, the company said Tuesday.

Several U.S. refineries are ramping up operations to produce more green fuels from vegetable oil and animal fats as they try to gain a foothold in the energy transition to lower-emitting fuels. Their demand for that feedstock has boosted prices sharply, threatening the future of some of these plans.

"Renewable diesel feedstock prices have increased considerably, particularly for refined, bleached and deodorized soybean oil to a level where the economics do not make sense for us to complete the conversion at this time," said CVR Chief Executive David Lamp.

He attributed the spike in feedstocks in part to the startup of new renewable diesel plants in the United States. Refiners like Valero, Marathon Petroleum, Phillips 66, and Hollyfrontier are all competing for a limited supply of feedstocks.

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"We believe renewable diesel producers with feedstock contract expirations coming up will be forced to give up some of the margin they currently enjoy," Lamp said.

Refiners profit the most by running "advantaged" feedstocks such as tallow, along with yellow and white grease, because the carbon intensity of the lifecycle of those feedstocks is considered very low. That makes those liquids more valuable under federal and California state programs that reward refiners with credits for using such products.

CVR is planning to build a pre-treatment unit, expected to be complete in the third quarter of 2022, to be used for bean oil when the plant does start producing renewable fuels.

This is the second time CVR has delayed the renewable diesel unit. In May the company delayed production due to severe weather in February and delays in equipment deliveries. The unit was expected to start processing renewable diesel last month. (Reporting by Laura Sanicola; Editing by Karishma Singh)