HollyFrontier converting Wyoming refinery into renewable fuels plant
HollyFrontier Corporation will permanently cease processing of crude oil at its 52,000-b/d refinery in Cheyenne, Wyoming., 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.
Approved by the company’s board of directors on the 29th May, the proposed Cheyenne conversion project will involve 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, HollyFrontier said.
According to the current project timeline, HollyFrontier plans to terminate traditional petroleum refining operations at the Cheyenne refinery by the end of July to begin work in August on converting certain unidentified units and hardware at the site for renewable diesel production.
The renewable diesel units (RDU) are scheduled to be completed during first-quarter 2022, according to the operator.
While HollyFrontier’s decision to proceed with the conversion project – which will cost between US$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 coronavirus (COVID-19) pandemic, weaker crude prices, forecasted uncompetitive operating and maintenance costs, and the anticipated loss of the US Environmental Protection Agency’s small refinery exemption.
The project also comes as part the operator’s broader plan to spend US$650-750 million between 2019-22 to make the renewables segment a larger part of its financial and operational future.
“Demand for renewable diesel, as well as other lower carbon fuels, is growing and taking market share based on both consumer preferences and support from substantial federal and state government incentive programmes.
“This represents an exciting opportunity to enhance both the profitability and environmental footprint of HollyFrontier through organic investment,” said Mike Jennings, HollyFrontier’s president and chief executive officer.
Alongside announcing the Cheyenne conversion, the company also said it will build a pre-treatment unit (PTU) at its 100,000-b/d Navajo refinery in Artesia, New Mexico, 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 Company LLC.
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 completion in first-half 2022 at a cost of between US$175-225 million – will cover about 80% of HollyFrontier’s total feedstock requirements for its renewable diesel plants, the company said.
Following start-up of the Cheyenne conversion project and US$350-million Artesia RDU – also scheduled for commissioning in first-quarter 2022 – HollyFrontier will have a 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 RIN purchase obligation under current market conditions.
HollyFrontier said expansion and integration of its renewables operations also will help further enable 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 Low Carbon Fuel Standard, which – already adopted by Canada and Oregon, and under consideration by ten other US states – mandates a 20% reduction in carbon intensity of transportation fuels by 2030 compared with the 2010 baseline year.
Source: Oil & Gas Journal