SGP taps IHI as EPC, FYI, for massive USA 5-project plan for renewable diesel and jet fuel

1.2 billion gallons in renewable jet and aviation fuels capacity, produced in the US Midwest, took a step closer to realization this week with news from SG Preston that the company has tapped IHI E&C, the Houston‐based engineering, procurement and construction division of Japanese giant IHI, for the building of a series of five commercial volume, advanced biofuels manufacturing plants, initially in the U.S. Midwest and Canada.

SG Preston will deploy its biofuels strategy initially at five plants (South Point and Van Wert, Ohio, Logansport, Indiana, and two additional sites in Michigan, and Ontario, Canada). “What you are seeing here are five inital sites with five initial facilities being deployed. Each one of these sites has been selected and sized to accommodate two [120 milion gallon] facilities. This is a matter of leveraging development efficiency, economies of scale, and best practices. Our timeline is to have at least five facilities online before 2020.”

The initial project targets South Point, in Lawrence County in the southeastern part of the Buckeye State, and is scheduled for completion before 2020.

More on the technology and the backstory.

The Digest’s 2015 5-Minute Guide to UOP.
UOP’s massive 800 million gallon Middle East bioproject.
World Cup taps Honeywell’s UOP.
The SG Preston background.

CEO Randy LeTang told The Digest that Southeastern Ohio was targeted because of its existing infrastructure — the site was formerly home to the failed Buckeye Ethanol project. In choosing Ecofining as the technology, LeTang noted that “we were only interested in a proven turn-key technology; there are a lot of good technologies out there, but most of them are too experimental for our business model.”

Timeline and Partners

On timeline, LeTang added, “When we initially launched this initiative we assumed that there was an established system of contractors in place that would deliver turnkey, fully guaranteed services in the marketplace in support of the national biofuels initiative, we were incorrect. What we have discovered is that, while there are proven technologies on one end of the development spectrum, and significant global client demand on the other, there truly never existed an integrated system for developing that technology through to the final product in a manner which would be attractive to investors, or even banks for that matter. SG Preston has developed that process. While we do not publicly comment on our development or activation timelines, suffice it to say that we have developed a system that will allow for the delivery of renewable diesel and jet fuel, in volume, well before 2020.”

Other partners in the project include the Lawrence County Economic Development Council, which is investing 62 acres in land and other incentives. The Appalachian Partnership for Economic Growth and JobsOhio were also instrumental, according to the developers, “in securing the investment and technology to play a role in the future of southern Ohio.”

Feedstock

The company will utilize waste fats, oils and greases as well as distiller’s corn oil obtained from ethanol plants — but said that they will not publicly outline their feedstock strategy in depth until at least Q4 of this year. The Digest has previously identified Honeywell-’s UOP as the technology licensor.

LeTang also told The Digest, “Feedstock procurement as defined by SG Preston is an internal, controlled development system that is well in process and will be online in time to support our facility demands, as well as some degree of external demand. We have involved prospective clients in this process and expect their participation throughout our entire supply chain.”

Financing

LeTang commented, “Financing partners will be announced shortly. There seems to be a notion that the fundamentals of project financing are grossly ignored in the biofuels development space, not so. Investors requirement that all components and assurances of a project, or in our case, a portfolio of projects, be in place in order to trigger financing, still apply. The more interesting subject is the willingness of clients, in lieu of traditional investors, in the renewable biofuels market to take a financial position in these projects to ensure that they are meeting, or have a higher probability of meeting their sustainability goals.”

The construction pathway

IHI E&C will serve as turnkey EPC to SG Preston’s biofuels initiative, delivering “lump sum,” fixed price engineering and construction, a first in the renewable diesel and jet fuels landscape at commercial scale.

“We have maintained our commitment to focused execution of our volume‐based advanced biofuels plan,” LeTang said. “We are extremely pleased to launch this industry‐changing initiative in coordination with IHI E&C as a part of our integrated system of global, blue chip partners to rapidly take strategy and concept into design, engineering and execution at commercial scale.”

SG Preston added that its “business model integrates bioenergy development and a market service strategy into existing delivery systems for energy supply and development across the entire value chain.” Dwayne Brown, SG Preston Senior Vice President of Strategic Initiatives, commented, “We are combining existing technology and infrastructure in new ways, and on a larger scale than ever before.”

The IHI E&C pact, says SGP, “will create and standardize replication benefits in engineering and design targeted at delivering volume quantities of advanced renewable diesel and jet fuel to global market customers in an abbreviated timeframe. This highly efficient development strategy will include abbreviated estimate development and synergies in procurement, construction, commissioning, and plant start‐up.”

Commercially viable without RINs or other renewable incentives

The projects as designed, LeTang told the Digest, did not require RINs to be economically viable — or other renewable fuel incentives. “If there are incentives that reward us for building capacity, that’s fantastic and we’ll take them,” he said, but stressed that they were a sweetener of returns rather than required for the project economics to work.

LeTang said that the company is “in discussions” with offtakers, noting that he expected that the fuel would be positioned as a premium additive blendstock.

“This is not going to be some typical biofuels project where there is a fuel produced for, say, $5.00 a gallon, pegged to the crude oil price, and the offtaker gets the RIN and hopefully nets out something close to the competitive market price for the fuel it replaces.

“For example,” he said, “we are targeting companies that are looking for a premium blendstock so that they can cost average with lower-end fuels yet still meet fuel specifications. For our model, the fuel not only has to be renewable, it has to be additive, and improves the end product. Take for example fuel blends where kerosene is added to fuels to alter their cold-flow properties — but it costs more and dilutes the energy content.”

Overall multi-project capacity

SG Preston is chatting about big capacity numbers — LeTang said that the initial project is “part of a larger vision of partnering with leading, global refining technology partners and local communities to develop a portfolio of renewable diesel and renewable jet fuel refineries targeting 1.2 billion gallons per year, or 20% of the federal RFS2 biomass-based mandate for biofuels.”

The Bottom Line

We continue to be in “wait and see” mode at this stage on projects brought forward by entrepreneurs in these financing conditions — but it definitely has a unique focus in competing with higher-cost fuel additives rather than finished fuels, and the addition of a major construction partner is helpful.