CVR delays Wynnewood renewable diesel conversion due to high feedstock prices

CVR plans to keep the hydrocracker at its 74,500 b/d Wynnewood, Oklahoma, refinery slated for conversion to a renewable diesel unit in petroleum service for now due to high renewable diesel feedstock prices, CEO Dave Lamp said on the company's second-quarter results call.

"Construction on the Wynnewood renewable diesel unit has been progressing as planned. We have reached a point where we are ready to bring the hydrocracker down to complete the final steps of the conversion process," he said on the Aug. 3 call.

"However, renewable diesel feedstock prices have increased considerably, particularly for refined, bleached and deodorized soybean oil, to a level where the economics do not make sense for us to complete the conversion at this time," he added.

Lamp said one of the key benefits of CVR's project is that the ability to run the hydrocracker either to make renewable diesel or hydrocarbon-based diesel but unfavorable feedstock economics for renewable diesel "will keep the unit in petroleum service for now."

CVR had planned to take the unit down to complete its conversion "in the September time frame," Lamp said.

However, CVR is working to develop on Phase 2 of its renewable diesel project at Wynnewood, which involves adding a pretreatment plant which will increase feedstock flexibility by allowing lower cost and lower carbon intensity feedstocks.

"We have started the process design engineering on the [pretreatment unit], which will take approximately 3 months to complete. We are also completing the process design of potential Phase 3 of developing a similar renewable diesel conversion project at Coffeyville," said Lamp, referring to its 132,000 b/d Coffeyville, Kansas, refinery.

Lamp noted that spike in renewable diesel feedstock prices, particularly for soybean, is due to the start-up of two new renewable diesel plants, including Marathon's Dickinson, North Dakota, plant which is the second largest renewable diesel plant in the US.

Soybean oil prices are averaging 65.44 cents/lb so far in the third quarter, compared with 2020's average price of 31.32 cents/b.

The BOHO spread – the price differential between soybean oil on the CBOT and heating oil futures on the NYMEX – is averaging $2.70/gal so far in the third quarter of 2021 compared with the $2.32/gal in 2020, Platts prices assessments show.

"As more RD plants are constructed in the U.S., we expect the feedstock market to react to increasing demand and begin pricing according to low carbon fuel standard credit values and freight economics," Lamp said.

"We believe RD producers with feedstock contracts expirations coming up will be forced to give up some of the margin they currently enjoy. With the installation of a pretreating unit, we should have the flexibility to run any type of feedstock that we can access, and we are talking to a variety of feedstock suppliers that are in our backyard," he added.