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US oil giants ExxonMobil and Chevron are seeking to bulk up in the burgeoning renewable fuels sector by finding ways to make such products at existing facilities, sources familiar with the efforts said.
The two largest US oil companies want to produce sustainable fuels without spending billions of dollars that some refineries are spending to reconfigure operations to make such products. Renewable fuels account for 5% of US fuel consumption, but are poised to grow as various industries adapt to cut overall carbon emissions to combat global climate change.
They both have huge refining divisions that contribute heavily to their overall carbon emissions. The companies have been criticised for a less urgent approach to renewable investments than European rivals Royal Dutch Shell and TotalEnergies, and have generally spent a lower percentage of their capital than those companies on green technologies.
The companies are investigating how to process bio-based feedstocks such as vegetable oils and partially-processed biofuels with petroleum distillates to make renewable diesel, sustainable aviation fuel (SAF) and renewable petroleum with relatively minimal increasing in capital spending.
Commercial production of renewable fuels is costlier than making conventional motor gasoline unless coupled with tax credits.
A team was created at Exxon’s request within ASTM International, international standards and testing organisation, to determine the capability of refiners to co-process up to 50% of certain types of bio-feedstocks to produce SAF, according to the sources.
Exxon did not respond to a request for comment.
Chevron is looking how to run those feedstocks through its fluid catalytic crackers (FCC), petroleum-producing units that are generally the largest component of refining facilities.
“Our goal is to co-process bio-feedstocks in the FCC by the end of 2021, to supply renewable products to consumers in southern California, a Chevron spokesperson said .
The company is partnering with the US Environmental Protection Agency (EPA) and California Air Resources Board (Carb) to produce fuel that would qualify for emissions credits.
If approved by the EPA and Carb, Chevron would be able to produce and generate credits for renewable petroleum, a source familiar with the matter said. That product is not yet commercially available, but can reduce carbon dioxide emissions by 61% to 83%, depending which feedstock is used, according to the California Energy Commission.
Chevron said on its earnings call earlier this month that in the second phase of its process, it would be the first US refiner to use the cracker to produce renewable fuels.
“We did it this way, in part, because it’s very capital-efficient ... It’s literally just a tank and some pipes,” Chevron CFO Pierre Breber said on the call.
Congress is considering legislation for tax credits that would further spur refiners to process sustainable aviation fuel commercially.
Some refiners, such San Antonio-based Valero Energy and Finland-based Neste, have ramped up production of renewable fuels from waste oils and vegetable oils to cash in on lucrative federal and state financial incentives. Several US refiners are in the midst of partially or totally converting plants to produce certain renewable fuels, particularly diesel.
If approved, new methods of producing renewable fuels at refineries could allow refiners to avoid lengthy environmental permitting processes. Many of these processes are still undergoing further testing to see which can make renewable fuels commercially, but without damaging refining units.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.