Neste inks renewable diesel JV with Marathon, to invest $1B in US production

from Finland and Ohio comes the news that Neste has established a 50/50 joint venture with Marathon Petroleum to produce renewable diesel following a conversion project of Marathon’s refinery in Martinez, California.

Through the JV Neste obtains a 50% interest in the Martinez Renewable Fuels project. The production output will be split evenly between the joint venture partners, and each partner will be responsible to market the products under its own brand and responsibility. The facility will be operated by Marathon, which has long experience as a leading refinery operator and in executing major capex projects in the US. Both Neste and Marathon will be responsible for feedstock sourcing for the joint venture.

Neste’s total investment will amount to approximately EUR 0.9 billion (USD 1.0 billion), inclusive of half of the total project development costs projected through the completion of the project. The project is expected to increase Neste’s renewable products capacity by slightly over 1 million tons (365 million US gallons) per annum. Production of renewable diesel is expected to come online in the second half of 2022. The facility is planned to reach its full annual nameplate capacity of 2.1 million tons (730 million US gallons) by the end of 2023.

Neste’s regional headquarters in North America is in Houston, Texas, and the company employs more than 500 people across the US. Neste’s renewable waste and residue sourcing platform in the US includes fully owned Mahoney Environmental, a leading collector and recycler of used cooking oil and Agri Trading, one of the largest independent renewable waste and residue fat and oil traders in the US.

The Neste backstory

Neste’s been on the move around the world, there’s been a lot of speculation that something was afoot for the critical US market, but nothing definitive until now.

In March we reported on Europe, when concluded it’s decision to expand at Rotterdam. The company had concluded a thorough study phase concerning the two possible locations, Porvoo, Finland and Rotterdam in the Netherlands. While there are many positive drivers for both sites, the difference between the costs is significant in favor of Rotterdam. The criteria for site selection included current markets and regulatory framework supporting market growth, raw material sourcing opportunities, investment and operating costs, infrastructure and low carbon utilities as well as local synergies and incentives. More on the story.

In April we expanded on that storyline. We reported that Neste would modify its existing renewables production capacity in Rotterdam, the Netherlands, to enable production of Sustainable Aviation Fuel (SAF). Currently the refinery produces mainly Neste MY Renewable Diesel™. The modifications to the refinery, an investment of approximately EUR 190 million, will enable Neste to optionally produce up to 500,000 tons of SAF per annum as part of the existing capacity. More on the story.

In January 2021, we reported that Neste successfully concluded its first series of trial runs processing liquefied waste plastic at its Porvoo refinery in Finland. After kicking the series off with its first-ever industrial scale trial run with liquefied waste plastic in 2020, Neste has conducted additional runs in 2021. In the course of the trial runs, Neste has been able to upgrade liquefied waste plastic to drop-in solutions for plastic production and develop industrial scale capabilities to upgrade recycled feedstocks. More on the story.

Meanwhile, from Japan last month news arrived that Neste and ITOCHU expanded their partnership to grow the availability of sustainable aviation fuel  in Japan. In the expanded partnership, ITOCHU acts as the branded distributor of Neste MY Sustainable Aviation Fuel in Japan making Neste MY Sustainable Aviation Fuel available first at the two largest Japanese international airports; Tokyo Haneda and Narita. Already in 2020, Neste, ITOCHU and All Nippon Airways started cooperating, establishing a SAF supply chain in Japan enabling Neste’s first SAF delivery into Asia to take place in Japan. Through their expanded partnership, Neste and ITOCHU are able to support other domestic and international airlines as well as other fuel suppliers at Haneda and Narita International Airports, going forward

The Marathon backstory

Marathon announced in 2020 that they were investigating the option to convert Martinez to renewable diesel. In  although Marathon Energy is still evaluating the potential refit of its Martinez oil refinery to produce renewable diesel, Hydrocarbon Engineering reports Marathon Energy the company has applied for permits in hopes of moving the process forward. The company said at the time they were aiming to commission production in 2022 and reach full capacity in 2023, if it takes the decision to take on the project. Using animal fats and vegetable oils, the facility would produce 736 million gallons per year. More on the story.

In February, we reported that their project in Dickinson, North Dakota was up and running — a much smaller but no less significant project in some ways, since it’s on the edge of the Bakken shale. We reported that “Marathon Petroleum is running full steam ahead on its two renewable diesel conversion projects as it embraces cleaner fuels to fill market demand, primarily in California.” The Dickinson, North Dakota facility began producing renewable diesel this quarter and should reach its nameplate capacity of 12,000 bpd by the end of Q1, with most of the fuel expected for the California market. Closer to its demand source, the proposed conversion of the Martinez, California refinery is awaiting permits and in the final engineering stage. The 48,000 bpd renewable diesel facility should reach full capacity by the end of 2023 but will already produce 17,000 bpd by H2 2022. More on the story.

In May, we reported on a decarbonization gambit by Marathon for the North Dakota operation. Marathon signed an agreement with One Energy Enterprises LLC to install five 2.3 megawatt wind turbines at MPC’s renewable diesel facility in Dickinson, North Dakota. The wind turbines will provide energy to the facility and help further decrease its carbon emissions profile. MPC contracted with One Energy to develop, own, and operate the turbines. One Energy will provide the capital for the project and MPC will pay a fixed price for the wind-generated electricity delivered by One Energy for a period of 20 years. The turbines are expected to generate more than 40 million kilowatt hours of energy each year, providing approximately 45% of the renewable diesel facility’s electricity needs. More on the story.

In August we reported that Marathon and ADM formed a joint venture for the production of soybean oil to supply rapidly growing demand for renewable diesel fuel. The Spiritwood complex is expected to produce approximately 600 million pounds of refined soybean oil annually, enough feedstock for approximately 75 million gallons of renewable diesel per year. Under the terms of the agreement, the joint venture will own and operate ADM’s previously announced soybean processing complex in Spiritwood, North Dakota, with ADM owning 75 percent of the joint venture and MPC owning 25 percent. When complete in 2023, the Spiritwood facility will source and process local soybeans and supply the resulting soybean oil exclusively to MPC. More or less, think North Dakota on this one. More on the story.

Reaction from the stakeholders

“This is a very important step in our renewables growth strategy execution. The location of the facility is in the middle of the growing renewable fuel market in California. The partnership will further strengthen our footprint in the United States, as we will have a broad value chain that covers feedstock sourcing to renewables production and sales in the US. We are thrilled to partner with Marathon: we both share an ambition in offering more high-quality, lower-emission renewable products, thus helping customers to achieve their sustainability goals,” said Neste CEO Peter Vanacker.

“We have committed to helping our customers decrease their greenhouse gas emissions by at least 20 million tons of CO2eq annually by 2030. This joint venture will help us in exceeding our commitment as it will bring a substantial amount of renewable diesel to our customers in the US. Our ongoing Singapore expansion project and this joint venture will increase our total production capacity of renewable products to 5.5 million tons by the end of 2023 and we will be the only global provider of renewable products with a production footprint in North America, Asia and Europe. As announced in Neste’s Financial Statement Release 2021, the project for a possible next worldscale renewables refinery in Rotterdam is in the engineering phase and we are approaching readiness for a final investment decision during the next months,” continues Vanacker.