Low-carbon feedstock and sustainable aviation fuel (SAF) opportunities will support strong run rates from Phillips 66's converted renewables plant in Rodeo, California, this year, chief executive Mark Lashier said today.
The outlook heralded a high output from the converted Rodeo refinery ramping up toward 50,000 b/d of renewable diesel capacity by the end of this month, despite historic lows in state and federal incentives for the fuel.
"Where we are today, economically, yes, the credits are kind of compressed, but feedstocks are lower than we anticipated as well," Lashier told the JP Morgan Energy, Power & Renewables conference. "We still see good economic incentives to run and run full."
The US independent refiner had started up pre-treatment units at the plant to begin processing lower-carbon feedstocks for renewable diesel in July and August, he said, consistent with previous guidance.
"That's how you really make money in these assets — you get the lowest-carbon intensity feedstocks at the best value and process them through the hydrocrackers," Lashier said. "
The facility would also bring online 10,000 b/d of renewable jet fuel blendstock production supporting 20,000 b/d of blended sustainable aviation fuel, a product Phillips 66 had not targeted in the initial concept for the site, he said.
Both state and federal incentives to supply renewable diesel along the west coast have fallen as the fuel inundates those markets. Renewable diesel alone made up roughly 57pc of California's liquid diesel pool and generated 40pc of the Low Carbon Fuel Standard (LCFS) credits in the state's market-based transportation fuel carbon reduction program by the end of last year.
The supply of lower-carbon fuels, led by renewable diesel, to the west coast LCFS markets have outstripped demand for deficit-generating petroleum fuels and led to growing reserves of available credits for compliance. California amassed more than 23mn metric tonnes of credits by the end of last year — more than enough left over after satisfying all of the new deficits generated last year to offset them a second time.
The volume of unused credits has sent their price tumbling to nine-year lows. Oregon and Washington credits, which are needed for similar but distinct programs in those states, have similarly dropped as renewable diesel supplies spread out along the west coast.
Gasoline consumption generates almost all new deficits in California. Year-over-year demand for the fuel nationwide has fallen below expectations this spring, Lashier said.
"We are not really seeing things pick up like a lot of us expected to," he said.
Lower-income customers struggling with higher costs on everything they buy may have forgone vacations, he said. The drop in broader buying power meanwhile had rippled through diesel consumption, he said.
"As we move towards more expensive energy sources, that's the part of the economy that gets squeezed as well," Lashier said. "Hopefully we move through that and reverse and that part of the economy can pick up as well as the higher end of the economy."
