Calumet Specialty Products plans SAF production at Montana Renewables plant

Calumet Specialty Products said it is planning to add sustainable aviation fuel production as well as renewable diesel at its Montana Renewables plant after finding an offtake partner for the fuel, the company said in the May 6 results call.

"We've... committed to the sale of roughly 2,000 b/d of SAF or sustainable aviation fuel, which makes us one of the first movers in on the early stage of a high growth business," said Todd Borgmann, Calumet's chief financial officer on the results call.

He declined to name the other parties of the offtake agreement but characterized them as top tier companies.

Many renewable projects in the works by other refiners have been evaluating whether or not to fold SAF production into their RD conversion projects, given the higher capital costs needed to reconfigure units.

Montana Renewables does not see this as a concern.

"We've bolted on the sustainable aviation fuel offering... we've always had the hardware capability for that. We were looking for a renewable jet offtake partner. We're pretty pleased with the initiative," Borgmann said.

"I'd be surprised if our physical barrels fall further than 100 miles from Puget Sound," he added.

Previously, Calumet created a separate unit called Montana Renewables LLC for the Great Falls, Montana, renewable plant conversion while keeping the conventional Canadian crude refining as part of Calumet Montana Refining LLC.

Montana RD offtake spoken for

Montana Renewables also has signed commercial offtake agreements for RD with three parties whose names were also undisclosed, according to Borgmann.

"We've agreed to terms on approximately 5,000 barrels a day of renewable supply, which you'll remember is the volume that we'll use during the commissioning period starting in September. We'll start receiving loads late next month to start the fill plan," Borgmann said.

"That accounts for all of our renewable diesel volume," Borgmann said.

Montana Renewables expects to begin production of renewables in September.

The plan is for the refinery to be taken completely offline in August, the end of Montana's asphalt season.

"The plan is to be down... in August. We need to de-energize the site, so we're not going to try to run part of it," said Bruce Fleming, who is heading up the Montana Renewables unit.

"We'll do the splicing or unsplicing, change the catalyst for the renewable feedstock and come back up. So, we'll have production in September," he added.

"I don't have the oil-to-oil outage. We do have a good amount of tankage relative to our size. So, we're going to leverage inventory build and draw plan as part of that. If you had to stick your thumb in the air, figure a month of lost production," Fleming said, referring to the timeline for the plant's outage.

Montana Renewables is about 80% done with engineering and procurement of renewable fuel feedstock, according to Fleming.

Calumet is also moving forward toward monetizing the Montana Renewables unit later this year. It hired Lazard as a strategic advisor to determine the best course of action for Montana Renewables.

"The renewable diesel value unlock potential remains high, with management further pressing towards a monetization event (e.g., IPO or SPAC, private capital raise)," wrote Raymond James analyst Justin Jenkins in a research note.

Montana Renewables' Fleming said that the purchase of Renewable Energy Group by Chevron for $3.15 billion announced in February "pretty well-confirmed our thinking on enterprise value."

"So we've accelerated our Montana renewables recapitalization," he added.