May 6, 2021 [S&P Global] Marathon Petroleum, the largest US independent refining company, is looking to balance its traditional oil refining business as it moves forward to increase its renewable fuel operations in order to lower its carbon footprint.
“There’s going to be some opportunities at both sides of the business as we change the portfolio over time,” CEO Michael Hennigan said during the May 4 first-quarter results call.
“We are a believer over time this energy evolution will continue to play itself out. And as it does, we’re going to be adaptive to the market,” he said.
Besides its 13 refineries with 2.9 million b/d of hydrocarbon processing capacity, Marathon is steadily expanding its renewables operations as it looks for ways to flourish in a low-carbon world.
Refinery segment spending
Marathon Petroleum expects to spend about $450 million on its refining business in 2021, about half of the company’s planned capital spending. This includes finishing up the STAR project, which integrated Marathon’s legacy Texas City, Texas, refinery with the former BP’s Texas City refinery.
Marathon, like many of its peers, struggled in the first quarter because of mid-February’s polar vortex, which impacted operations at most of US Gulf Coast and Midwest refineries.
Marathon was forced to shut down two Texas refineries during the deep freeze — the 585,000 b/d Galveston Bay plant and 131,000 b/d El Paso refinery — which cut its first-quarter refinery throughput to 2.38 million b/d. Second-quarter throughput is forecast at 2.67 million b/d.
“El Paso was able to quickly resume operations. … Galveston Bay was able to begin its planned turnaround during the period,” Maryann Mannen, Marathon’s chief financial officer, said during the call.
Planned turnaround costs for the second quarter are projected to be $100 million in the second quarter, slightly lower than the $112 million spent in the first quarter. This includes planned work underway at the Galveston Bay refinery.
Martinez: ‘A good project for us’
Approval by Marathon’s board of directors of the conversion of the Martinez, California, refinery to a renewable diesel plant will increase the company’s production of renewable diesel. The refinery was shut down in 2020, in the middle of the coronavirus pandemic refined fuels demand drop, as the company studied repurposing the plant.
“Martinez was a very high-cost oil refinery,” Ray Brooks, Marathon’s head of refining, said on the call.
“But there’s some real gems that make it a good project for us from the renewables fuel standpoint,” he added.
The refinery has multiple hydro-processing units and two hydrogen plants. The plant will produce 17,000 b/d of renewable diesel by the second half of 2022 when the first hydrotreater is converted from oil to renewable feed. In 2023, when the pretreatment plant comes online, it will enhance the kind of feedstocks the plant will be able to run. The facility is expected to be capable of producing 48,000 b/d by the end of 2023.
Dickinson adds wind turbines
Marathon’s 12,000 b/d renewable diesel facility Dickinson, North Dakota, on May 4 inked an agreement with One Energy Enterprises to install five 2.3-MW wind turbines on-site. These turbines will provide about 45% of the facility’s electricity needs, lowering its carbon emissions. The plant came online at the end of 2020.
“Lowering the carbon intensity of renewable fuels produced at the Dickinson facility also aligns with MPC’s objective of reducing its companywide GHG emissions intensity by 30% below 2014 levels by 2030. MPC is the first independent refining company in the U.S. to link achieving such a GHG goal to its executive and employee compensation,” Brooks said in a separate statement on the project issued May 4.
On the call, Brooks said that the pretreatment plant for Dickinson has started up and has successfully pretreated corn oil.
“It’s a significantly lower carbon intensity than soybean oil,” he added. This makes it more valuable than other feedstocks with higher CI.
The plant sends the renewable diesel by rail to California, which makes it eligible for credits under the state’s Low Carbon Fuel Standard Act as well as get the $1/gal federal Blenders Tax Credit and any RINs created under the US Environmental Protection’s Renewable Fuel Standard.
Platts assessments show the price of US West Coast renewable diesel including credits are averaging $5.49/gal so far in the second quarter of 2021, compared with 66 cents/gal excluding credits.
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