CVR Energy brings Wynnewood RD unit online as Midwest diesel cracks soar

CVR Energy completed the conversion of a diesel hydrotreater at its 74,000 b/d Wynnewood, Oklahoma, refinery to run renewable feed during a first quarter turnaround around at the plant, CEO Dave Lamp said on the May 3 results call.

"The renewable diesel unit has begun operations and is currently operating at half-rate as we work out the bugs and work toward certification of the renewable diesel project," he said.

California is the destination of Wynnewood's renewable diesel output and the product needs to be certified in order to be eligible for the state's Low Carbon Fuel Standard credits.

Expectations are Q2 RD throughput to range between 3,500 b/d and 4,500 b/d.

CVR also is planning to add a pre-treatment unit for the RD plant, which will give it greater optionality as to what renewable feedstock to use. The PTU is expected on line Q2 2023, delayed by supply chain issues, Lamp added.

RD start-up despite high diesel cracks

CVR had delayed the start-up of the RD unit from September 2021 due to high feedstock costs of soybean oil and kept it running on petroleum-based feeds. However, now even with record high diesel cracks, CVR decided to put the conversion in place.

"We are giving up an opportunity cost in refining because...we're cutting a little bit of crude rate...to accommodate this. The RDU, in general, looks profitable to us," Lamp said.

Platts assessments put US West Coast renewable diesel prices, including all credits, at $7.72/gal for the week ended April 29, despite LCFS prices averaging $113.9/mt for the week, down from $115 the week earlier.

Lamp said that CVR was still positive on the RD business, despite a fall-off in LCFS prices as more projects come online and the volatile prices in the feedstock markets.

"The swings in the market are just incredible," he said, adding "it's even worse than the oil business."

"A lot of it is driven by the diesel differentials and what's happening there on the cracks," he said.

Midwest cracks rise on low Magellan inventories

With the Wynnewood turnaround completed in March, CVR has no planned work at either of its plants in 2022, with work planned on the 132,000 b/d Coffeyville, Kansas refinery, in 2023.

As a result, CVR expects Q2 refinery throughput to rise, ranging from 195,000 b/d to 210,000 b/d compared with Q1 throughput of 197,000 b/d.

"With Mid-Con demand for gasoline and diesel in line with pre-Covid levels, inventories have tightened since the beginning of the year, which have significantly improved the basis in Group 3," said Lamp.

Lamp was referring to the Group 3 market of the US Midwest, which is served by the Magellan pipeline and carries refined products from the US Gulf Coast north to Minnesota.

"Distillate inventories in the Magellan system are nearly 25% below five-year average levels pushing Group 3 cracks to near $60/b in April," he said.

"I'm very constructive on what Group looks like," he said, noting quarterly performance depends on turnaround cycles and weather.

"But right now, our market looks wonderful," he added.