US, European refiners trim conventional capacity, hasten shift to renewable fuels amid pandemic

After several years of capacity additions designed to boost production of fuels that comply with increasingly more stringent environmental regulations, the global refining industry in 2020 faced unprecedented alterations to the demand landscape resulting from the coronavirus (COVID-19) pandemic that prompted many refiners to accelerate an inevitable reevaluation of existing and future operations.

Refiners already were implementing business strategies increasingly aimed at ensuring long-term operational competitiveness by reducing costs of compliance with federal and state low-carbon fuel standards (LCFS) before COVID-19, but drastic curtailments to demand for finished petroleum products by yearend 2020 resulted in a host of plans by global refiners to adjust operational configurations and processing capabilities. While operators in the Asia-Pacific, India, Africa, and the FSU largely continued to advance previously planned projects to increase overall capacities in those regions, many operators elsewhere launched programs to add renewable fuels production to their portfolios via conversion and modification of existing manufacturing assets or construction of grassroots plants. Faced with the economic reality of a lower-for-longer demand scenario, still other refiners opted to eliminate existing conventional crude processing capacity permanently as part of an ongoing trend among US and European operators seeking to achieve market balance by rationalizing current overcapacity.

This year’s worldwide refining report specifically examines major projects and developments announced by US and European refiners, particularly those focused adding or expanding capacity for renewable fuels production.

The latest OGJ annual worldwide refining survey, which will be available to online subscribers in December, shows a readjustment in anticipated global crude oil refining capacity as of Jan. 1, 2021, with year-on-year changes continuing to result largely from OGJ’s broadened data collection efforts to include capacity data an individual operator has disclosed publicly but did not voluntarily report to OGJ by the survey deadline.

While the current survey does include data captured via OGJ’s more expansive collection methods, these independent data-gathering procedures are evolving on a continual basis, particularly for regions such as the Asia Pacific, Eastern Europe, the Middle East, South America, and Africa, where capacity information on refinery processes downstream of crude distillation units remains difficult to obtain.

 OGJ continues to evaluate additional approaches to enhanced, independent data discovery methods as part of an ongoing program to provide readers the latest operational data available on global refineries whether reported by survey respondents or not.

US refiners swiftly act

The most aggressive in adapting existing operations to new market conditions, US operators in 2020 announced a combination of refinery closures and planned divestitures, as well as multiple projects involving adding or modifying existing capacity to enable production of renewable fuels.

Marathon Petroleum Corp. (MPC) in August 2020 confirmed plans to permanently shutter crude oil processing at two of its US refineries as part of the operator’s strategy to increase its overall competitiveness as a result of decreased product demand caused by the ongoing COVID-19 health crisis (OGJ Online, Aug. 3, 2020). As part of the restructuring plan, MPC indefinitely idled its 161,000-b/d refinery in Martinez, Calif., as well as its 27,000-b/d refinery in Gallup, NM, with no plans to restart normal operations at either manufacturing site.

While MPC disclosed no further details regarding any future plan for the Gallup refinery, Michael J. Hennigan—MPC’s president and chief executive officer—did confirm the company is evaluating strategic repositioning of the Martinez refinery into a renewable diesel plant, which would align with objectives of California’s LCFS as well as MPC’s own greenhouse gas (GHG)-reduction targets. MPC also said it planned to convert the Martinez refinery into a terminal facility. As of early November 2020, MPC was progressing with activities associated with the conversion of the Martinez site into a renewable diesel plant, including applying for permits, advancing discussions with feedstock suppliers, and beginning detailed engineering activities. Scheduled for startup in 2022, the Martinez plant will be able to produce 12,000 b/d of renewable diesel with the potential to increase to a full-production capacity of 48,000 b/d in 2023, according to the operator’s third-quarter 2020 earnings report to investors.

MPC also confirmed in early November that its previously announced project to convert its former 19,000-b/d refinery in Dickinson, ND, into a 12,000-b/d, 100% renewable diesel refinery was in the process of commissioning (OGJ Online, Dec. 20, 2019). The biorefinery will use a feedstock of corn, soybean oil, and other organically derived feed to produce LCFS-compliant renewable diesel that will be sold into the California market.

MPC’s midyear restructuring program follows the operator’s early 2020 cancellation of a proposed petrochemical feedstock project proposed by former Tesoro Corp. to enhance xylene recovery at the 119,000-b/d Anacortes, Wash., refinery about 70 miles north of Seattle (OGJ Online, Jan. 6, 2020; July 21, 2014). MPC withdrew plans to manufacture and export 15,000 b/d of mixed xylenes—petrochemicals used to make plastics—which would have caused a dramatic increase in energy use required for the refinery and would have required the transport of large quantities of feedstocks, as well as shipping tankers of the refined product, to the Asia-Pacific region, resulting in a climate impact equivalent to adding 75,000 vehicles to the road. As originally planned, the Anacortes project included a $90-million naphtha isomerization project as well as the $300 million mixed xylenes project. Designed to comply with upcoming reduced-sulfur gasoline regulations, the naphtha isomerization project, which was scheduled for startup in 2018 pending permitting, also intended to reduce gasoline production costs (OGJ Online, Feb. 15, 2015).

Phillips 66 also revealed in August 2020 its plan to permanently cease processing crude oil at the 120,000-b/d Rodeo, Calif., portion of its San Francisco refining complex, and convert the plant into a renewable fuels refinery as part of an investment strategy in the operator’s energy transition to ensure long-term viability and competitiveness (OGJ Online, Aug. 13, 2020).

Known as Rodeo Renewed, the proposed $750-800-million project will involve construction of new pretreatment units as well as repurposing of existing hydrocracking units to enable production of 680 million gal/year of renewable diesel, renewable gasoline, and sustainable jet fuel for the California market from a feedstock of cooking oil, fats, greases, and soybean oils delivered from global sources via the plant’s flexible logistics network of marine and rail terminals. Combined with production of renewable fuels from an unidentified project also in development, the converted Rodeo plant, once fully operational, would produce more than 800 million gal/year (50,000 b/d) of renewable fuels, making it the world’s largest plant of its kind.

Alongside the Rodeo conversion project, Phillips 66 said it also will shutter the Rodeo carbon plant and 44,500-b/d Santa Maria refining site in Arroyo Grande, Calif.—which converts heavy crude oil into high-quality feedstock for further processing into gasoline, diesel, and jet fuel at the Rodeo refinery—in 2023, with associated crude pipelines also to be taken out of service in phases starting in 2023.

Following completion of the reconfiguration project, Phillips 66’s San Francisco refining complex—which consists of the Rodeo plant in the San Francisco Bay Area and the Santa Maria refinery, linked by a 200-mile pipeline—would no longer produce fuels from crude oil, resulting in anticipated 50% and 75% reductions in GHG and sulfur dioxide emissions, respectively.

Part of the Phillips 66’s investment in the energy transition and aligning with its belief that the world will require a mix of fuels to meet the growing need for affordable energy, the operator said Rodeo Renewed also will enable the company to generate credits under the California LCFS, which is designed to reduce GHG emissions and decrease petroleum dependence in the state’s transportation sector by encouraging use of cleaner low-carbon fuels and incentivizing production of those fuels. Already adopted by Canada and Oregon, and under consideration by 10 other US states—the LCFS mandates a 20% reduction in carbon intensity (CI) of transportation fuels by 2030 compared with the regulation’s 2010 baseline year.

Phillips 66 is securing permits and completing its environmental impact report on the proposed Rodeo Renewed project, with an already submitted land-use permit application to be open for public comment during spring-summer 2021. Now under way, conversion of the Rodeo refinery’s existing diesel hydrotreater to process soybean-based oils into 9,000 b/d of renewable diesel is scheduled to be completed by mid-2021, with final investment decision (FID) on the entire Rodeo Renewed conversion project due sometime in first-quarter 2022, the company told investors in its November presentation on third-quarter 2020 earnings. If approved by Contra Costa County officials and the Bay Area Air Quality Management District, Phillips 66 said it expects renewable fuels production to begin in first-quarter 2024.

The proposed Martinez renewables project follows Phillips 66 and Renewable Energy Group Inc.’s (REG) cancellation earlier in the year of a joint project to build a 250 million-gal/year diesel plant in Ferndale, Wash., due to permitting delays and uncertainties (OGJ Online, Jan. 21, 2020). The plant—which would have built adjacent to Phillips 66’s 105,000-b/d Ferndale refinery to access the site’s existing infrastructure, including tank storage, a dock, and rail and truck rack access—was to be equipped with REG’s proprietary BioSynfining technology for production of renewable diesel fuel, with planned feedstocks to include a mix of waste fats, oils, and greases, including regionally sourced vegetable oils, animal fats, and used cooking oil (UCO).

In June 2020, HollyFrontier Corp. announced it will permanently cease crude processing activities at its 52,000-b/d refinery in Cheyenne, Wyo., and convert the plant into a renewable diesel refinery by 2022 as part of the operator’s increased focus on expanding and integrating its renewables business (OGJ Online, Oct. 9, 2020; June 2, 2020). Approved by the company’s board of directors in May, the proposed Cheyenne conversion project involves repurposing the refinery’s current footprint and a portion of its existing assets to enable production of 90 million gal/year (6,000 b/d) of renewable diesel.

According to the current project timeline, HollyFrontier—which permanently ended traditional petroleum refining operations at the Cheyenne refinery in third-quarter 2020 to begin work on converting certain unidentified units and hardware at the site for renewable diesel production—said in November 2020 that the renewable diesel unit (RDU) remains on schedule for commissioning during first-quarter 2022.

While HollyFrontier’s decision to proceed with the conversion project—which will cost between $125-175 million—was primarily based on expectations that future free cash flow generation in Cheyenne would be challenged due to lower gross margins resulting from economic impacts of the COVID-19 pandemic, weaker crude prices, forecast uncompetitive operating and maintenance costs, and the anticipated loss of the US Environmental Protection Agency’s small refinery exemption, the project is also part of the operator’s broader plan to spend $650-750 million between 2019-22 to make the renewables segment a larger part of its financial and operational future.

In addition to announcing the Cheyenne conversion, HollyFrontier also said it will build a pretreatment unit (PTU) at its 100,000-b/d Navajo refinery in Artesia, NM, where construction is set to begin on a new 120-125 million-gal/year (about 9,000 b/d) RDU to be operated by HollyFrontier subsidiary Artesia Renewable Diesel Co. LLC (OGJ Online, Mar. 23, 2020). Designed to increase flexibility and upgrading of renewable feedstock by treating degummed and unrefined soybean oil, bleachable fancy tallow, and distillers corn oil, the proposed PTU—due for startup in first-half 2022 at a cost of $175-225 million—will cover about 80% of HollyFrontier’s total feedstock requirements for its renewable diesel plants.

Based on current market conditions, HollyFrontier will have combined capacity to produce more than 200 million gal/year of renewable diesel to help meet demand for low-carbon fuels while covering the cost of the operator’s annual EPA-regulated renewable identification numbers (RIN) purchase obligation under EPA’s Renewable Fuel Standard (RFS) following startup of the Cheyenne conversion project and $350-million Artesia RDU, which also is scheduled for commissioning first-quarter 2022.

HollyFrontier said expansion and integration of its renewables operations also will help the company’s long-term competitiveness by increasing its ability to comply with and benefit from expanding federal, state, and global requirements and incentives in the renewables sector, including California’s LCFS as well as the US Department of Energy’s biodiesel mixture excise and biodiesel production and blending tax credits.

In its quarterly earnings call for second-quarter 2020, CVR Energy Inc. told investors its board of directors authorized engineering studies and preparation of final cost estimates for a project that would convert an existing 19,000-b/d hydrocracker at subsidiary Wynnewood Refining Co. LLC’s (WRC) 74,500-b/d refinery in Wynnewood, Okla., to allow for production of renewable diesel and naphtha (OGJ, Oct. 5, 2020, p. 38). Designed to take advantage of excess hydrogen capacity at the site and help offset rising costs of RIN compliance, the proposed $100-million project—including tanks, a rail terminal, and a staging facility—would enable processing a 100-million gal/year primary feedstock of readily available, extremely low-CI refined and bleached soybean oil from Washington into 6,000-7,000-b/d of renewable diesel and naphtha, as well as already completed work to retool the refinery for maximum condensate processing, David L. Lamp, CVR Energy’s CEO and president, told investors in early November 2020.

Based on CVR Energy’s plan to expedite the project to take advantage of the biodiesel mixture excise tax credit—which, through Dec. 31, 2022, would ensure a $1/gal federal income tax credit for each gallon of biodiesel produced from soybean oil feedstock—the company would pay off the entire initial investment in about 18 months. It would also be positioned to make provisions for other additions and revamps to allow processing of virtually any renewable feedstock, including a second phase of the project that would involve installation of a PTU for processing of inedible corn oil, animal fats, and UCO.

In November and December 2020 presentations to investors, CVR Energy also said existing excess hydrogen and high-pressure hydrotreating capacities at subsidiary Coffeyville Resources Refining & Marketing LLC’s 132,000-b/d refinery in Coffeyville, Kan., could allow for a similar—and potentially larger—renewables conversion project at that site.

Pending FID on the Wynnewood project, renewable diesel and naphtha production from the proposed hydrocracker conversion—which would retain the unit’s flexibility to return to conventional hydrocarbon processing should economics support doing so—could begin as soon as July 1, 2021. Once in operation, the hydrocracker renewable conversion project would reduce WRC’s overall crude throughputs to between 55,000-59,000 b/d, Lamp said in Nov. 3, 2020, call with investors.

In June 2020, Global Clean Energy Holdings Inc. (GCEH) let a contract to Haldor Topsoe AS to provide process technology for GCEH’s previously announced plan to convert its recently purchased 70,000-b/d Bakersfield, Calif., refinery into a 15,000-b/d renewable diesel plant (OGJ Online, June 9, 2020; May 11, 2020). Haldor Topsoe will license its proprietary HydroFlex renewable fuel technology as well as supply basic engineering, proprietary equipment, and catalysts for the refinery revamp, which—once completed—will enable renewable diesel production from both proprietary camelina oil and traditional biofuel feedstocks. Fuel production from the retooled refinery will meet California LCFS, as well as comply with ASTM D975 diesel specifications, resulting in major reductions of carbon dioxide (CO2) emissions due to its lower CI.

Alongside processing GCEH’s patented fallow-land varieties of camelina—which, traditionally grown in rotation with wheat, is cultivated as an alternative to leaving land fallow to avoid displacing or competing with food crops—the HydroFlex unit will process a slate of additional nonpetroleum renewable feedstocks, such as UCO, soybean oil, and distillers’ corn oil.

The contract award—a value for which was not disclosed—follows GCEH’s May 7 purchase of the idled Bakersfield refinery from Delek US Holdings Inc. subsidiary Alon Bakersfield Property Inc. for $40 million. With the former oil refinery already equipped with a large portion of the equipment needed for production of renewable diesel, the conversion project will involve a full turnaround and refurbishment of existing equipment to enable production from renewable feedstocks.

Now under way and scheduled to take 18-20 months to complete, the revamp and conversion project will be executed primarily by local trade unions through Primoris Services Corp. subsidiary ARB Inc., which is serving as engineering, procurement, and construction (EPC) contractor. Due for startup in late 2021, the revamped refinery will not process petroleum of any kind.

In mid-November 2020, Hemisphere Ltd. LLC subsidiary Continental Refining Co. LLC (CRC) said it is evaluating a plan to convert CRC’s now idled 5,500-b/d crude oil refinery in Somerset, Ky., into a biodiesel production site (OGJ Online, Nov. 19, 2020). The proposed $25-million investment would involve acquiring, relocating, and installing a soybean-crushing, biodiesel refining, and blending facility equipped to process 3 million bushels/year of locally sourced soybean production into biofuels and other soy-based products. Alongside producing up to 5 million gal/year of renewable-based, ultralow-sulfur diesel—including B6 to B100 biodiesel—the repurposed site also would produce high-protein fiber meal for animal feed, soybean oil for industrial use, and crude glycerin.

While it disclosed no further operational details regarding the Somerset refinery conversion plan, CRC did confirm that, if approved, construction on the project, as well as reception and processing of soybeans, would begin by October 2021. The intended agricultural technology, or AgriTech, redevelopment plan for the Somerset refinery follows Hemisphere’s 2011 purchase and more than $40-million additional investment to upgrade and modernize crude processing capabilities of the plant, which restarted in January 2013 after its shuttering in 2010 under former owner Somerset Energy Refining LLC (OGJ Online, Sept. 6, 2016; Mar. 29, 2016; Dec. 14, 2011). Hemisphere subsequently halted operations at the refinery again in 2018 to conduct economic and engineering studies for a proposed $75-million modernization program that would involve an overhaul of every unit in the plant (OGJ Online, June 26, 2020). In July 2020, however, CRC decided the already idled refinery would permanently remain offline and be redeveloped into another business or commercial properties.

Also in November 2020, Diamond Green Diesel Holdings LLC (DGD)—a 50-50 joint venture of Valero Energy Corp. and Darling Ingredients Inc.—let a contract to Honeywell UOP LLC to license its proprietary Ecofining process technology for a 30,000-b/d unit that will more than double annual production at its 275-million gal/year renewable diesel plant in Norco, La. (OGJ Online, Nov. 2, 2020; Apr. 14, 2020). Following startup of the second production train in 2021, DGD’s Norco plant will be equipped to produce 675 million gal/year (about 44,000 b/d) of renewable diesel. Already under way and scheduled for startup in late 2021, the $1.1-billion, 400-million gal/year expansion of DGD’s Norco refinery—which process edible and inedible bionutrients such as animal fats, UCO, and inedible corn oil into renewable diesel both compatible with petroleum-based diesel and transportable via pipeline—will be supported by expanded renewable fuel mandates and carbon pricing, according to Valero.

Renewable Energy Group Inc. (REG) also is expanding capacity of its existing 90-million gal/year renewable diesel refinery in Geismar, Ascension Parish, La (OGJ Online, Oct. 6, 2020). Requiring a minimum $825-million capital investment, the proposed 250-million gal/year will more than triple the Geismar biorefinery’s renewable diesel production capacity to 340 million gal/year, as well as include marine and rail infrastructure upgrades to allow for supplementary shipping methods, reducing the number of trucks on local roadways. With construction on the project scheduled to begin in mid to late 2021, the expansion is targeted for mechanical completion in late 2023. Announcement of the Geismar renewable diesel plant expansion follows REG’s cancellation earlier in the year of a joint project with Phillips 66 for a proposed 250-million gal/year diesel plant in Ferndale, Wash. (OGJ Online, Jan. 21, 2020)

In adjusting to new market dynamics, however, other refiners implemented plans involving permanent capacity reductions across their US businesses. In November 2020, Royal Dutch Shell PLC announced the permanent closure of subsidiary Equilon Enterprises LLC (dba Shell Oil Products US)’s 239,000-b/d refinery in Convent, St. James Parish, La., as part of the company’s broader global program to focus investments on a core set of integrated manufacturing sites more strategically positioned for the transition to a low-carbon future (OGJ Online, Nov. 6, 2020). The decision to close the refinery follows Shell’s notification to Convent staff in July that it was seeking to divest the site in a process during which, despite efforts, a viable buyer never emerged. Following completion of the shutdown process, which began mid-November, Shell said it would continue marketing the Convent refinery for divestment.

The closure of its Convent refinery follows Shell’s late-September 2020 announcement that it planned to integrate its chemicals and manufacturing businesses to create an end-to-end chemicals and products organization consisting of six energy and chemical parks focused on delivering lower-carbon products to customers. As a result of the COVID-19 pandemic and as part of its goal to become a net-zero energy business by 2050 or sooner, Shell has had to act quickly and decisively, making some very tough financial decisions to ensure the company remains resilient, Ben van Buerden, Shell’s CEO, said on Sept. 30. With the focus on helping its customers decarbonize a cornerstone of Shell’s net-zero emissions future, the reshaping program will involve dramatic change for the company, including changes to its business plans over time to become net zero in all its operations, according to van Buerden.

“Currently, about 85% of our carbon footprint comes from our customers’ emissions when they use our products. That is where the real challenge is,” said van Buerden. “[It’s] a mission of working with society to help it get to net zero. Because it is not good enough to just wait and see what society does. No. To help, we have to shape that journey. I believe that is what our customers, and society in general, have been telling us over the last few years.”

“[This] means major changes at refineries, chemicals sites, onshore and offshore production facilities,” van Buerden said. “But it also means that we have to change the type of products that we sell. You cannot do that by just having different products which still produce emissions. We will have some oil and gas in the mix of energy we sell by 2050, but it will be predominantly low-carbon electricity, low-carbon biofuels, it will be hydrogen, and it will be all sorts of other solutions, too.”

In the downstream, the program entails reducing Shell’s refining footprint to less than 10 sites, keeping those sites that are strategically essential in key locations, with flexibility to adapt and further integrate with the company’s growing chemicals and trading businesses. While the company remains in the process of working out specific details, Shell said it expects the reshaping program’s efficiency, reduced organizational complexity, and other measures will reduce between 7,000-9,000 jobs (including about 1,500 employees who have agreed to take voluntary redundancy during 2020) to result in an annual cost saving of $2-2.5 billion by yearend 2022 and partially contribute to a previously announced underlying operating cost reduction of $3-4 billion by first-quarter 2021.

Shell currently holds interest in 14 global refineries, 11 of which it acts as operator. Following the reshaping program, Shell’s remaining refining assets will include:

• Shell Deutschland Oil GMBH’s 140,000-b/d refinery at Wesseling, Germany, which together with the former Godorf refinery near Cologne-Godorf, form its 325,000-b/d integrated Rheinland refinery, Germany’s largest.
• Shell Nederland Raffinaderij BV’s 405,000-b/d Pernis refinery and integrated petrochemical production site in Rotterdam, the Netherlands.
• Shell Singapore’s 463,000-b/d integrated Pulau Bukom refinery on Bukom Island, Singapore.
• Shell Scotford’s integrated 92,000-b/d refinery and chemicals plant near Edmonton, Alta.
• Equilon Enterprises LLC (dba Shell Oil Products US)’s 229,000-b/d refining and petrochemical complex in Norco, La.
• Shell Deer Park Refining LP’s 312,000-b/d integrated refining and petrochemicals manufacturing site in Deer Park, Tex.

Earlier in the year, Shell announced Equilon Enterprises LLC (dba Shell Oil Products US) would further trim its US refining operations with the proposed sales of its 137,000-b/d Puget Sound refinery near Anacortes, Wash., and subsidiary Shell Chemical LP’s 90,000-b/d Saraland refining and petrochemical site in Mobile, Ala., as part of ongoing plans to reshape its refining portfolio globally to leverage the company’s natural strengths and integration opportunities (OGJ Online, Mar. 9, 2020). In February, the company also completed the sale of its 157,000-b/d dual-coking refinery and integrated logistics assets at Martinez, Calif., to PBF Energy Inc. subsidiary PBF Holding Co. LLC for $1.2 billion (OGJ Online, Feb. 3, 2020).

In late-October 2020, PBF Energy Inc. unveiled a reconfiguration plan for its US East Coast (USEC) refining system, including the indefinite idling of certain processing units, as a result of COVID-19’s ongoing impacts to demand (OGJ Online, Oct. 29, 2020). As part of reconfiguring its USEC refining system—which is comprised of the 190,000-b/d refinery in Delaware City, Del., and 180,000-b/d refinery in Paulsboro, NJ—PBF Energy will idle the smaller of two crude units, the coker, the FCC, and several smaller, unidentified units at the Paulsboro refinery, the operator said in its third-quarter 2020 earnings report to investors.

Depending on market conditions, PBF Energy said it expects combined throughout of the USEC refining system to average 260,000 b/d, or 110,000-b/d lower from the system’s overall nameplate capacity of 370,000 b/d. Unidentified units at the Paulsboro and Delaware City refineries, however, will operate at higher utilization and efficiency as part of the reconfiguration program, which PBF Energy anticipates will result in annual operating and capital expenditures savings of about $100 million and $50 million, respectively. The reconfigured USEC refining system—which will retain its capability to process varied crudes as well as gain increased flexibility to respond to changing market conditions—is scheduled to be completed by yearend 2020. Following reconfiguration, PBF anticipates combined near-term throughput of its entire refining system—which, in addition to the two USEC refineries, also includes the 170,000-b/d refinery in Toledo, Ohio; 189,000-b/d Chalmette refinery outside of New Orleans; 155,000-b/d refinery in Torrance, Calif.; and 157,000-b/d refinery in Martinez, Calif.—to be in the 700,000-800,000-b/d range.

Despite challenging market conditions brought on by the global pandemic and government measures taken to mitigate its spread during third-quarter 2020, PBF Energy said its refining capital spending guidance program likely will meet its previously revised guidance of about $360 million for 2020, with the bulk of the spending already having occurred during the first and second quarters.

Europe

In late-September 2020, Total SA confirmed plans to end crude oil processing activities at its 101,000-b/d Grandpuits refinery at Seine-et-Marne near Melun and operations at nearby Gargenville depot at Yvelines in northern France to convert the site into a zero-crude industrial platform by 2024 (OGJ Online, Sept. 28, 2020). As part of an investment totaling more than €500 million, the Grandpuits platform will focus on four new industrial activities, including production of renewable diesel; production of bioplastics; plastics recycling; and operation of two photovoltaic solar power plants. Alongside forming part of Total’s overall net-zero strategy to meet carbon neutrality, the decision to cease oil refining at Grandpuits also supports Total’s investment in helping France achieve its goals for the energy transition up to 2040.

“With the industrial repurposing of the Grandpuits refinery into a zero-crude platform focused on energies of the future connected with biomass and the circular economy, Total is demonstrating its commitment to the energy transition and reaffirming its ambition to achieve carbon neutrality in Europe by 2050,” said Bernard Pinatel, president of Total Refining & Chemicals.

Total will discontinue crude oil refining and storage of petroleum products in first-quarter 2021 and late 2023, respectively, but local consumers and airports in the Greater Paris region will remain supplied by Total’s existing 219,000-b/d Donges refinery near Saint Nazaire—which is currently undergoing a €450 million modernization—and 253,000-b/d Normandy-Gonfreville ‘l Orcher refinery (OGJ Online, Aug. 7, 2017).

As part of the zero-crude industrial repurposing project at Grandpuits, Total said it will build a new renewable diesel unit aimed at contributing to France’s roadmap for incorporating 2% of sustainable aviation fuel by 2025 and 5% by 2030. Scheduled for startup in 2024, the new biorefinery will process 400,000 tonnes/year (tpy) of primarily animal fats from Europe and UCO—supplemented with other vegetable oils like rapeseed but excluding palm oil—primarily from local suppliers to produce the following:

• 170,000 tpy of sustainable aviation fuel.
• 120,000 tpy of renewable diesel.
• 50,000 tpy of renewable naphtha for production of bioplastics.

Production of biofuels—which reduce carbon emissions by at least 50% compared to their fossil equivalents—are one component of Total’s strategy to meet the challenge of carbon neutrality.

A second project involves construction of Europe’s first polylactic acid, or polylactide (PLA), manufacturing site. To be built by Total Corbion PLA BV—a 50-50 joint venture of Total and Corbion NV—the proposed €200-million plant—to be funded equally by Total and Corbion—will produce 100,000 tpy of PLA bioplastic from a feedstock of sugar by 2024. The Granpuits site-conversion project also includes construction of France’s first chemical recycling plant. To be developed by Total (60%) and partner Plastic Energy Ltd. (40%), the plant will use a pyrolysis melting process to convert plastic wastes into a liquid called TACOIL, which will be used as feedstock for production of polymers with identical properties to virgin polymers suitable for use in food-grade applications. The new recycling plant is intended to help meet Total’s objective of producing 30% of its polymers from recycled materials by 2030.

Total’s wholly owned affiliate, Total Quadran SAS—which specializes in renewable energy development and production in France—also will build and operate two photovoltaic solar plants, one with capacity of 28 MWp (at the Grandpuits site) and the other with capacity of 24 MWp (at the Gargenville site). Total said the two solar plants will contribute to the company’s goal of providing green electricity to all its industrial sites in Europe.

Total previously completed a €275-million conversion of its former 153,000-b/d at La Mède refinery on the French Riviera into France’s first biorefinery (OGJ Online, Apr. 16, 2015). Commissioned in mid-2019, the 500,000-tpy biorefinery also includes a logistics and storage platform, a solar energy farm, and a training center.

Earlier in the year, Total postponed restarting the Grandpuits refinery following a planned month-long maintenance shutdown in early March 2020 amid the country’s ongoing reduced demand for fuels caused by the COVID-19 pandemic (OGJ Online, Mar. 26, 2020).

The Grandpuits conversion announcement follows Total’s late-July 2020 agreement to sell its UK downstream business—including subsidiary Total Lindsey Oil Refinery Ltd.’s 109,000-b/d refinery in North Killinghome, Immingham, Lincolnshire, and associated logistics assets—to Prax Group (also known as State Oil Ltd.), a London-based global independent trading, storage, distribution, and retail firm (OGJ Online, July 27, 2020). Prax Group and Total UK Ltd. said the sale—scheduled to close by yearend 2020—involves all activities of Total Downstream UK Ltd., which alongside the Lindsey refinery, also includes the Finaline pipeline and Killingholme loading terminal, together with Total’s shares in the following joint venture operations:

• Hertfordshire Oil Storage Ltd., 60%.
• Associated Petroleum Terminals Ltd., 50%.
• Crude Oil Terminals Ltd., 50%.
• Humber Oil Terminals Trustee Ltd., 50%.
• Warwickshire Oil Storage Ltd., 50%.

Total’s divestment of the UK downstream assets comes as part of the operator’s strategy for its European refining base, which involves focusing investments on integrated refining and petrochemical platforms, Pinatel said.

Total’s proposed divestment of the Lindsey refinery follows the operator’s 2015 major investment to modernize and streamline operations under the company’s broader plan to restructure and streamline its European refining businesses to ensure long-term survival by innovating and adapting to shifting global and regional demand trends (OGJ Online, Aug. 7, 2017; July 7, 2017; Apr. 16, 2015). Total’s completion of the first phase of its restructuring program in 2016 at Lindsey involved reducing crude processing capacity by about half from its previous capacity of 200,000 b/d, as well as work to simplify and improve overall efficiency and conversion ratios to safeguard Lindsey’s ongoing competitiveness (OGJ Online, Oct. 11, 2017). Resulting in cessation of processing activities at the refinery’s crude distillation unit 1 (CDU1) and other stage-1 units, the project also improved furnace operations and operating efficiency, as well as enabled full-production capacity at CDU2.

The operator also previously announced two projects at the Lindsey refinery planned for 2019-20 that were to involve adaptations to the manufacturing site’s hydrodesulfurization and fluid catalytic cracking units to increase production of cleaner, lighter fuels. While the company has yet to provide specific updates related to those proposed projects, a series of upgrades at the refinery targeted at improving operational efficiency were nearing completion, according to Total Country Services UK Ltd.’s 2018-19 informational document. In addition to implementation of digital technologies that have increased available capacity of processing units to 97%, an investment in the refinery’s fluid catalytic cracker has enabled reduction of sulfur in the site’s diesel production to less than 10 ppm. The refinery also began the process in 2018 to modify an unidentified unit to improve quality of its production in a project on which EPC was to be completed by yearend 2020. Currently, the Lindsey refinery processes more than 20 different types of crudes to produce more than 7 million tpy of finished products—including gasoline, diesel, bitumen, fuel oil, and aviation fuels—which are distributed across the UK and transported abroad via sea, road, rail, and pipeline.

Elsewhere in the UK, Petroineos Refining Ltd., a joint venture of Ineos AG-formed Ineos Investments (Jersey) Ltd. and China National Petroleum Corp.’s PetroChina Co. Ltd. (PetroChina) subsidiary PetroChina International London Co. Ltd., said in mid-November 2020 that it will permanently shutter two processing units as part of a reconfiguration strategy at Petroineos Manufacturing Scotland Ltd.’s 210,00-b/d Grangemouth integrated refinery complex on the Firth of Forth in Scotland (OGJ Online, Nov. 19, 2020). Designed to adapt the plant to reflect the global decline in demand for fuels and align its capacity to meet local demand in Scotland, Northern England, and Northern Ireland, the proposed plan aims to mothball the refinery’s CDU-1 as well as its FCC unit, both of which have been offline throughout the COVID-19 pandemic. Petroineos said the move comes as the global refining industry faces huge challenges, including increasing electrification of the transport fleet and more fuel-efficient vehicles that have led to reduced demand for fuel, a trend that has only accelerated this year by the COVID-19 health crisis. Permanent mothballing of the CDU-1 and FCC units will reduce future incurred costs associated with operating the two older plants to ensure a viable, longer-term business. A timeframe for when Petroineos will shutter the two units at the Grangemouth refinery—Scotland’s only—has yet to be disclosed.

In November 2020, Phillips 66 confirmed receipt of a major piece of equipment for a project to increase production of renewable fuels at its 221,000-b/d Humber refinery at South Killingholme in North Lincolnshire, UK, about 180 miles north of London on England’s eastern coast (OGJ Online, Nov. 19, 2020). Built by Fabricom SA’s ENGIE Fabricom UK, the 15-m tall, 80-tonne processing module—which includes two reactors and nearly 600 m of pipework—will convert UCO to expand the refinery’s renewable diesel production capacity to 3,000 b/d from its current 1,000-b/d capacity by January 2021. As the UK’s first refinery to convert waste oil into road fuel, the Humber refinery—which began production of renewable diesel in 2018—also has plans under way to increase low-carbon, renewable fuels production at the site another 2,000-5,000 b/d by 2024. The operator said the UCO-to-renewable-diesel project reaffirms Phillips 66 and the Humber refinery’s commitment to creating a lower-carbon future in the UK and beyond.

Alongside the UCO-to-renewable-diesel capacity expansion, the Humber refinery also is progressing on a project that will use renewable hydrogen to produce fuels at the site. The pilot project—named Gigastack—is a collaboration between Phillips 66 UK subsidiary Phillips 66 Ltd., Danish wind farm developer and operator Ørsted AS, hydrogen systems developer ITM Power PLC, and UK-based consultancy Element Energy Ltd. that aims to harness offshore wind from Ørsted to generate renewable electricity that would be used to power electrolysis for production of hydrogen, a low-emission fuel capable of powering transportation and heavy industry, as well as multiple refining processes. As part of the project’s first phase, ITM Power designed a 5-Mw electrolyzer stack that, under the second phase, will be installed and trialed for development of a 100-Mw electrolyzer system equipped to use the renewable electricity to split water into oxygen and hydrogen gas, the latter of which would be fed to Humber for uses that include lowering the sulfur content of diesel fuel. Launched in early 2020, the project’s second phase—which has secured £7.5 million (nearly $10 million) in funding from the British government as part of a £90-million ($117-million) package to cut UK carbon emissions—includes execution of front-end engineering design (FEED) study for the 100-Mw electrolyzer system.

In addition to aligning with the operator’s goal of growing new low-carbon markets within the UK and worldwide, Phillips 66 said the Gigastack project provides the company and its partners an opportunity to develop a new renewable hydrogen market based on a feedstock of only water and renewable power. In a September 2020 presentation, Phillips 66 confirmed the Humber refinery would use the hydrogen supply in hydrotreating processes for production of both conventional and waste-based fuels, refueling of refinery heaters, and possible future expansions such as battery coke opportunities, which require hydrotreating capability. The Humber refinery, which already runs at up to 40% hydrogen in fuel gas, also is currently assessing requirements to run beyond that level, according to Mike Wailes, Phillip 66’s director of European strategy.

In late-November 2020, Neste Corp. said it is moving forward with its earlier announced plan to restructure its refining operations in Finland as part of the operator’s strategy to ensure long-term competitiveness of its oil products business under a program that involves permanently shuttering processing and production at its 58,000-b/d Naantali refinery (OGJ Online, Sept. 14, 2020). As part of the first-phase restructuring, Neste will cease all processing activities at the Naantali refinery by the end of March 2021 and transform the site—already home to Finland’s fifth-largest harbor in terms of traffic volume—exclusively into a harbor and distribution terminal. A second phase will involve upgrading the 206,000-b/d refinery in the Kilpilahti industrial area of Porvoo to co-processing renewable and circular raw materials. The proposed business transformation comes amid Neste’s determination that demand for fossil-based fuel products—which has been drastically reduced by COVID-19—will continue to decline, requiring fundamental changes to secure competitiveness of the company’s business.

Upon announcing initial restructuring plans in September 2020, Peter Vanacker—Neste’s president and CEO—said that, with the energy transition proceeding faster than expected, previously planned operating and maintenance investments in the Naantali refinery were no longer viable or sustainable given the global refining industry’s current overcapacity. Intended to improve Neste’s productivity, resource efficiency, and adaptiveness to market changes, Neste’s planned restructuring is anticipated to result in annual fixed-cost savings of about €50 million, according to the operator.

Neste’s proposed business transformation plan will be the company’s second major attempt to improve competitiveness of its overall refining operations after its €500-million program executed between 2014-17 to integrate the Naantali and Porvoo refineries into a single Finnish refining system (OGJ Online, Aug. 9, 2017; Mar. 23, 2015; Oct. 7, 2014). Following its previous reconfiguration, the Naantali was revamped to produce diesel and specialty products, including solvents and bitumen, and maintain an important role in producing feedstocks, such as vacuum gas oil, for production lines in Porvoo. Gasoline components produced at Naantali were refined into finished products at Porvoo, with Naantali’s terminal capacity used for distributing Porvoo’s gasoline production. Consolidation of the two Finnish refineries enabled Neste to increase diesel output alongside a simultaneous reduction in heavy fuel oil production from the integrated unit.

In late-October 2020, Swedish refiner Preem AB, a wholly owned subsidiary of Corral Petroleum Holdings AB, confirmed it will convert its 220,000-b/d refinery in Lysekil, Sweden, into Scandinavia’s largest manufacturing site for renewable fuels (OGJ Online, Oct. 27, 2020; Sept. 28, 2020). With an application to amend the refinery’s existing environmental permit to enable large-scale production of renewable fuels planned for submission before yearend 2020, Preem said it expects to reach FID on the project in summer 2021 for targeted startup of the new plant by 2024 at the latest. As part of the project’s initial phase, Preem will carry out a redevelopment and rebuild of the refinery’s existing Synsat plant that currently produces Swedish Environmental Class 1 diesel with a maximum sulfur content of 10 ppm (wt) to increase the company’s renewable diesel production by 650,000-950,000 cu m/year, which is as much as two to three times higher than present renewable production capacity at the operator’s 125,000-b/d refinery in Gothenburg, Sweden. When the Lysekil conversion is completed, the reconfigured plant will have the capacity to process up to 40% renewable raw materials, with a goal of increasing that rate in the future to further phase out processing of fossil-based feedstock by the plant.

Preem is also undertaking a project to ramp up renewable fuels production at its Gothenburg refinery, at which Sweden’s largest production plant for renewable diesel and aviation fuel already is under development (OGJ Online, Mar. 12, 2020). Scheduled for startup in 2024, the new 16,000-b/d renewables unit—which will be completely dedicated to producing renewable fuels from tall oil, tallow, and other renewable feedstocks—will produce about 1 million cu m/year of fuels, which corresponds to about 25% of Sweden’s estimated consumption of renewable fuels in 2030 and will enable reduced CO2 emissions from cars and planes by 2.5 million tpy. The Gothenburg renewable fuels plant and reprioritization at Lysekil come as part of Preem’s broader plan to become the world’s first climate-neutral petroleum and biofuels company with net-zero emissions across its entire value chain before 2045. The operator also previously said it plans to increase its renewable fuel production to 5 million tpy by 2030. Preem additionally intends to build a full-scale carbon capture plant at the Lysekil refinery to reduce CO2 emissions by one-third by 2025 following a demonstration project at the site that began in 2019 and will run to 2021 (OGJ Online, Mar. 4, 2019).

In mid-November 2020, Repsol SA let a contract to Axens Group of France to license technology for Spain’s first advanced biofuels production plant to be built at the operator’s 220,000-b/d Cartagena refinery in the country’s southeastern province of Murcia, along the Mediterranean Sea (OGJ Online, Nov. 11, 2020). Axens will provide licensing for its proprietary Vegan technology—which hydrotreats a wide range of lipids for production of low-density, high-cetane renewable diesel as well as renewable, sulfur-free jet fuel—to be implemented in a new hydrotreating unit that will use a feedstock of recycled raw materials to produce 250,000 tpy of hydrobiodiesel, biojet fuel, bionaphtha, and biopropane. First announced in late-October 2020, the €188-million Cartagena renewables investment—which also includes commissioning of a new hydrogen plant—comes as part of Repsol’s December 2019 commitment to advancing the energy transition and the company’s goal of achieving net-zero emissions by 2050 in accordance with the Paris Agreement.

“With [the Cartagena advanced biofuels project], we at Repsol are decisively promoting a new technological route that will be key in our path towards carbon neutrality,” said Josu Jon Imaz, Repsol’s CEO, noting that this latest initiative adds to the company’s portfolio of existing projects in energy efficiency, low-emissions electricity generation, renewable hydrogen, circular economy, synthetic fuels, as well as CO2 capture, use, and storage. Emphasizing the importance of the circular economy as a tool for efficient use of resources, Repsol said it plans by 2030 to double production of high-quality biofuels from vegetable oils (HVO) to 600,000 tpy, half of which will be produced from waste before 2025.

In addition to two industrial decarbonization projects planned at its majority owned Petróleos del Norte SA’s (Petronor) 220,000-b/d Bilbao refinery in Múskiz, Vizcaya—including a new €60-million, 50-b/d zero-emissions synthetic fuel production plant based on CO2 and green hydrogen due for startup in 2024, as well as a grassroots €20-million pyrolysis plant that will use a feedstock of 10,000 tpy of urban waste to produce gas to partly replace traditional fuels currently used in the Bilbao refinery’s production processes—Repsol confirmed its 150,000-b/d Puertollano refinery in Spain’s province of Ciudad Real, Castile-La Mancha, also produced its first batch of biojet fuel Spain’s aviation market in July 2020.

As part of its commitment to reach net-zero emissions by 2050, Repsol said in late-August 2020 it also is executing a €32-million expansion of an existing polypropylene plant at its 186,000-b/d integrated refining and petrochemical complex in Tarragona, Spain, that—scheduled for startup in 2021—will enable manufacturing of ultralight, highly impact-resistant polymers primarily for the automotive sector to help reduce the weight of motor vehicles, thus lowering overall industrial emissions. By yearend 2020, Repsol said it also will reduce its carbon intensity index by 3% with respect to a 2016 baseline.

BP PLC and Ørsted AS of Denmark in November 2020 agreed to jointly develop a proposed large-scale renewable hydrogen project at subsidiary BP Europa SE’s 100,000-b/d Lingen refinery in northwest Germany’s Emsland region (OGJ Online, Nov. 11, 2020). Scheduled to become operational in 2024, the Lingen Green Hydrogen (LGH) project will include a 50-Mw electrolyzer and associated infrastructure capable of generating 1 tonne/hr—or nearly 9,000 tpy—of renewable hydrogen sufficient to replace about 20% of the refinery’s current fossil-based hydrogen consumption. The LGH project—which would reduce CO2-equivalent emissions by about 80,000 tpy in its initial phase—also intends to support the partners’ longer-term ambition to build more than 500 Mw of renewable hydrogen capacity at Lingen to meet the refinery’s entire hydrogen demand, as well as provide feedstock for future synthetic fuel production at the site.

Designed to replace the Lingen refinery’s current CO2 emissions-generating method of producing hydrogen via natural gas reforming, the proposed LGH project’s electrolysis-based system—which will be powered by an Ørsted North Sea offshore wind farm—would split water into hydrogen and oxygen gases to produce zero-emissions green hydrogen. Alongside green hydrogen production, the project also will focus on maximizing electrolyzer-system efficiency to enable flexible operation and complete integration into the refinery. To accommodate the latter objectives, scope of the engineering and commercial studies will include assessments for sustainable uses of the main by-products of electrolysis, primarily oxygen and low-grade excess heat. Already having jointly applied to fund the LGH project with the EU Innovation Fund—currently one of the largest funding programs for innovative low-carbon technologies that focuses particularly on energy intensive industries—BP and Ørsted will now work together to further define the project and agree on definitive documents for a targeted FID in early 2022. For BP, the project comes as part of its strategy to develop its hydrogen business based on hydrogen produced from renewable energy, in line with the operator’s goal of becoming a net-zero company by 2050 or sooner.

In November 2020, OMV Petrom SA announced completion of a project to boost bioblending capacity as well as improve infrastructure for transport, unloading, and storage of biocomponents at its 4.5-million tpy Petrobrazi refinery in the southeast region of Romania, near Ploiesti City (OGJ Online, Nov. 19, 2020). Initiated in 2018 and completed at an investment of about €21 million, the project increased blending capacity of biocontent in fuels produced at the refinery to about 350,000 tpy from 200,000 tpy in alignment with European regulations requiring the renewable energy content in transportation fuels to increase to 14% in 2030 from 10% in 2020 as part of its program to reduce GHG emissions arising from the transportation sector.

OMV Petrom—which disclosed no further details regarding work involved during the project—said the Petrobrazi refinery now supplies fuels with a volumetric biocontent of 6.5% in diesel and 8.0% in gasoline. The increase in bioblending capacity at Petrobrazi forms one component of a combined effort across all levels of OMV Petrom to meet a goal of reducing its carbon emissions 27% by 2025 vs. the 2010 baseline year. A member of the United Nations Global Compact since 2013, and which in July 2020 announced its support for recommendations issued by the Task Force on Climate-related Financial Disclosures (TCFD) regarding risks and opportunities on climate change, OMV Petrom said its investments since 2005 at the Petrobrazi refinery have totaled €1.8 billion, a third of which has been dedicated to projects aimed at reducing environmental impacts.

Investments to reduce the environmental impacts at the refinery include a €46-million project completed in 2019 at the coker, where the unit’s outdated closed-blowdown system was replaced with a new one equipped with best available technologies for recovery of hydrocarbon vapors to ensure complete elimination of any emissions of potential volatile organic compounds. OMV Petrom in 2019 also completed startup of a new €65-million Polyfuel unit that—using environmentally friendly technology—has allowed the Petrobrazi refinery to shift as much as 50,000 tonnes of its current production of LPG components into Euro 5-quality gasoline and diesel. In its 2019 sustainability report, OMV Petrom said it also was making an unspecified investment in a project at Petrobrazi to enable the refinery to coprocess about 90,000 tpy of vegetable oil and UCO by 2025.

In October 2020, Gunvor Group Ltd. confirmed a decision to move forward with its earlier announced proposal to mothball refining operations at subsidiary Gunvor Petroleum Antwerpen NV’s (GPA) 107,500-b/d refinery located near the Berendrecht and Zandvliet locks in the northern part of Belgium’s Port of Antwerp, home to Europe’s largest integrated chemical cluster (OGJ Online, June 23, 2020). Cessation of refining activities at Antwerp, however, will not impact GPA’s terminal operations—including 1.1 million cu m of storage capacity—which remain ongoing, according to Torbjörn Törnqvist, Gunvor’s chairman and CEO.

Alongside mothballing of GPA’s Antwerp refinery, Törnqvist said the company also discontinued crude processing activities at subsidiary Gunvor Petroleum Rotterdam BV’s 83,600-b/d Rotterdam. With the refinery’s two CDUs now shuttered, operations at the Rotterdam site will focus on desulfurization of high-sulfur products, gasoline production, and biofuels processing, according to the operator’s website and Törnqvist.

Upon first announcing proposed plans in June 2020, Gunvor cited several key factors specifically informing its decision to evaluate halting refining activities at Antwerp, including:

Lack of oil products demand. The global economic downturn caused by the COVID-19 pandemic created an unprecedented slowdown in product demand—particularly for jet fuel and gas oil—putting pressure on European utilization rates and sustained negative refining margins.

Lack of suitable feedstocks. As a simple hydroskimming refinery, GPA was designed to process mainly medium-sulfur crude and related feedstocks, which have gradually become more costly due to less availability. As a result of newer, more sophisticated global refining capacity coming online, demand for these feedstocks will continue to increase, making it more difficult for GPA to compete.

Increasing competition. Over the last several years, growth in refining capacity has been balanced by corresponding growth in global products demand. This trend came to an end in late 2019, however, when additional complex refining capacity began coming on stream, with substantially more planned during the next 5 years. With no sign of any major demand growth in the short and medium-term on the horizon, these planned capacity additions will create an excess of global refining capacity for the near future.

Increasing costs. Alongside economic challenges resulting from Europe’s already difficult refining environment, Gunvor also noted operational expenses for maintenance activities as well as costs related to regulations and environmental requirements—including CO2 taxes—have concurrently increased.

With crude processing activities now ended at the Antwerp and Rotterdam sites, subsidiary Gunvor Raffinerie Ingolstadt GMBH’s 110,000-b/d refinery at Ingolstadt, Germany, about 80 km north of Munich, is Gunvor’s only remaining refinery (OGJ Online, Mar. 26, 2020).