US' CVR mulls separate renewables business as it moves ahead with RD projects

CVR Energy is considering creating a separate renewables business as it moves forward with completing the renewable diesel hydrocracker project at its Wynnewood, Oklahoma, refinery, which had been put on hold earlier this year due to high feedstock costs.

"We are ready to complete the final steps of the conversion of the Wynnewood hydrocracker to renewable diesel service," CVR CEO Dave Lamp said on the Nov. 2 third-quarter results call.

Originally scheduled to be converted in Q3 2020, CVR held off "keeping the unit in traditional petroleum service because the margins were higher," Lamp said.

"With the recent increase in crude oil and diesel prices, the HO-BO spread has improved and the basis for refined bleached deodorized soybean and corn oil has subsided," he added.

The HO-BO spread, also known as the BO-HO spread, measures the value of renewable feedstock soybean oil against petroleum-based diesel. So far, the Q4 BO-HO spread is averaging $1.9927/gal, compared with $2.4194/gal in Q3, according to S&P Global Platts assessments.

"Our current plan is to move the planned turnaround at Wynnewood to the spring of next year, during which time we'll finish the hydrocracker conversion, with completion and startup of the renewable diesel unit expected in mid-April," Lamp said.

Initially, CVR plans to run deodorized and bleached soybean oil, with a little corn oil, prior to the startup of the pre-treatment unit.

Pre-treatment unit approved

CVR's board of directors approved a pre-treatment unit for Wynnewood that will allow the hydrocracker to process feedstocks with greater flexibility, giving it the ability to make more valuable, lower carbon fuel, which earns higher carbon credit prices.

"We are currently estimating completion date late in the fourth quarter of 2022 at a capital investment of approximately $60 million," Lamp said.

The pre-treatment unit's size matches expected RD output of 7,300 b/d.

Meanwhile, high level engineering work for the renewable diesel project at CVR's other refinery in Coffeyville, Kansas, is currently underway.

The refinery is expected to have a capacity of 150 million gallons/year with the option of up to 25 million gallons of that amount to be sustainable aviation fuel, according to Lamp.

For the project to proceed, Lamp said CVR needs some assurance of additional markets for low carbon fuel standards, with credits similar to those offered by California's LCFS. About 12 states are in various stages of getting it on the ballot, he said.

"In conjunction with all of this, we are currently evaluating breaking out the renewable business as a separate entity," Lamp said.

A separate unit would make it easier for CVR to get financing for its renewable projects, giving the company "a fairly long runway for developing an impactful business in the green energy space," he added.

CVR's previous thinking about increasing its refining footprint has shifted, Lamp said.

While CVR believes fossil fuels will be around for a long time, "all of our investment money going forward is really around the renewable space. And the rest of it is just sustaining capital to maintain what we have in refining," Lamp added.

CVR plans to run between 210,000 b/d and 230,000 b/d in Q4, up from 211,000 b/d in Q3.

It is pushing up a refinery turnaround at Wynnewood from the fall of 2022 to the spring, tying it in with the hydrocracker conversion. The 40-day turnaround involves the fluid catalytic cracking unit, an alkylation unit, and a crude unit.