Vertex Energy signs 5-year renewable diesel supply contract with Idemitsu

Vertex Energy said in a Feb. 17 statement it has contracted 100% of the renewable diesel to be produced at its Mobile, Alabama, refinery to Idemitsu Apollo Renewable Corporation under an offtake agreement which will increase volumes of the low-carbon fuel heading to the lucrative California market.

Under the five-year product supply agreement with the California-based wholesale supplier of gasoline and diesel transportation fuel, Vertex will supply Idemitsu Apollo all the renewable diesel (RD) output from the 90,000 Mobile refinery.

"As one of the largest suppliers of both conventional and renewable fuels in North America, Idemitsu is a valued off-take partner that provides Vertex with a depth of product marketing experience and access to growing regional markets in the western United States and Canada," the statement said.

Vertex bought the Mobile refinery from Shell in May 2021 for $75 million, with plans to continue to make conventional fuels while converting an existing hydrocracker to make RD.

Vertex said it planned to operate the plant as a conventional plant while adding in RD production capacity. Vertex is converting an existing hydrocracker to make RD with initial production of 10,000 b/d expected by end 2022 increasing to 14,000 b/d by mid-2023, a company spokesman said at the time.

The Idemitsu deal is predicated on the closure of the sale of the refinery from Shell Oil to Vertex, which has been delayed from originally scheduled Q4 2021 timeframe. Company representatives from Shell Oil and Vertex were not immediately available to provide a new date

Under the contract terms with Idemitsu, Vertex will receive payment for each gallon of RD produced at the time of production based on an indexed, spot-market price, providing immediate working capital to Vertex.

US West Coast RD with credits are averaging $6.76/gal so far in Q1 2022, up from Q4 2021 average of $6.40/gal, Platts assessments show. Prices reflect a quarter-on-quarter drop in the price of California's Low Carbon Fuel Standard credits partially offset by higher D4 RINs prices as well as increase in RD prices without credits.

Stripping out credits, Platts assesses USWC RD prices as averaging $2.10/gal so far in Q1 2022, up from the $1.73/gal in Q4 2021.

Besides the LCFS credit, prices include the $1/gal federal Blenders Tax Credit, and renewable identification number or RINs credits, used by obligated parties to comply with mandated volumes under the Environmental Protection Agency's Renewable Fuel Standard. D4 RINs generated by RD production averaged $1.58/RIN so far in Q1 2022, up from the $1.54/RIN in Q4 2021, according to Platts.

According to JP Morgan research, the US RD supply was 160 million gallons in December, up from 139 million in November. Of this, 111 million gallons were produced in the US in December, up from the 101 million gallons in November.