During a May earnings call, Vertex Energy, a U.S.-owned, Texas-based specialty refiner of alternative feedstocks and marketer of high purity petroleum products, reported that the company is pausing renewable fuels production and redirecting the hydrocracking unit to conventional fuels and products.
The company had a previously planned catalyst and maintenance turnaround scheduled for 2024 and will use that event to load conventional catalyst and bring the unit out of turnaround and into conventional service.
In 2022, Shell sold its Mobile Chemical LP Refinery in Mobile, Alabama, to Vertex Energy, and Vertex CEO Benjamin P. Cowart said the company made a significant investment in the asset to support the renewable energy transition.
“We went into this space to solve that problem. And it’s not a problem so much today as we think it will be in the future. This asset was built to pivot, and we decided this may take a little while before the market can really need and appreciate the asset and what it can do,” Cowart said. “We have the fortunate capability to pivot back over to carbon for the time being and focus on making fuel.”
“Unfortunately, we’ve met some headwinds with the current renewable market — renewable volume obligations that the EPA sets to blend renewables into carbon fuels. They would have had to ratchet that on an annual basis, but they decided last summer that [they] would lock in the current requirements and carry that through 2025.”
He said a lack of demand and lower RIN credits also factored into the company’s decision.
“When you have more production at market than you have demand, we get an RIN credit for making the fuel, and if the RINs are not used to offset obligations, then it’s sold at a lower and lower price. And that’s really what happened. Our revenue from the RINs has really fallen off the table,” Cowart said.
Vertex Director of Communications Brandon Deitz said the transition is expected to be in place by Q4 of 2024.
The total cost of about $10 million for the transition was previously budgeted as part of the planned catalyst and maintenance turnaround and does not represent a material change to the forecasted capital spend, the company previously stated.
During Q2, Vertex ran its remaining inventories of renewable feedstock, which was expected to allow the company to improve its working capital and margins in Q2 from the renewable business.
When referring to the company’s decision in light of the near-term outlook for renewables, Deitz said, “We were due to do a catalyst swap anyway. We don’t see anything that indicates a material change in the other direction relative to where they’ve been in the last year.”
Cowart reiterated that the company remains optimistic about the broader future of renewables in the energy transition, while stressing the need for flexibility in the process.
“This asset is our most valuable asset. We have lots of different ways to monetize this asset over time,” he said. “A company like Vertex needs to be nimble to deal with the ebb and flow. The path to sustainability has to be sustainable.”
For more information, visit vertexenergy.com.
